Innovation and Venture Capital Exits

Armin Schwienbacher

Economic Journal, 2008, vol. 118, issue 533, 1888-1916

Abstract: This article analyses how start‐ups financed by venture capital choose their innovation strategy based on the investor's exit preferences and thereby form different outcomes in the product market. It considers innovation choices and venture capital exits (IPO vs trade sale) in a setting in which entrepreneurs derive private benefits from staying independent, which is better guaranteed under an IPO. The entrepreneur has incentives to distort the innovation strategy in order to induce the venture capitalist to bring the company public. The analysis generates a number of empirical implications for the link between innovation, valuation, venture capital exit routes and market structure.

Date: 2008
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https://doi.org/10.1111/j.1468-0297.2008.02195.x

Related works:
Journal Article: Innovation and Venture Capital Exits (2008)
Working Paper: INNOVATION AND VENTURE CAPITAL EXITS (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:econjl:v:118:y:2008:i:533:p:1888-1916

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