Acquisitions, Entrepreneurial Capital, and Firm Performance

Mika Pajarinen and Ilkka Ylhäinen

No 179, ETLA Reports from The Research Institute of the Finnish Economy

Abstract: Abstract We examine how entrepreneurial capital—wealth, experience, skills, and networks—released through acquisitions is reallocated to new and existing firms. We combine Finnish administrative data on firm exits, owners, board members and executives, and financial statements. We identify acquisitions from worker flows and estimate the performance of destination firms using difference-in-differences and doubly robust augmented inverse probability weighting (AIPW) estimators. Entrepreneurs who sell their firms often continue in active ownership, board, and executive roles, especially in existing firms. Acquisition counterparties—acquirers and merger partners—experience substantially faster sales growth than control firms, but their labor productivity develops less favorably, particularly in the first post-acquisition years. Profitability improves relative to controls in the existing firms that former owners join. Newly founded destination firms have substantially higher sales than control firms. We find no evidence that reallocated entrepreneurial capital generates systematic productivity gains or increases the likelihood of equity financing relative to control firms.

Keywords: Mergers and acquisitions; Entrepreneurial capital; Serial entrepreneurship; Firm dynamics; Firm Performance; Difference-in-differences (search for similar items in EconPapers)
JEL-codes: C23 G32 G34 L25 L26 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2026-08-03
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