Effect of Financial Clusters on Startup Mergers and Acquisitions

Saurabh Ahluwalia and Sul Kassicieh
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Saurabh Ahluwalia: Finance and Innovation Department, Anderson School of Management University of New Mexico, Albuquerque, NM 87131, USA
Sul Kassicieh: Finance and Innovation Department, Anderson School of Management University of New Mexico, Albuquerque, NM 87131, USA

IJFS, 2021, vol. 10, issue 1, 1-13

Abstract: The conventional wisdom has maintained that being in proximity to entrepreneurial ecosystems helps startups to raise financing, develop and grow. In this paper, we examine the effect of a major component of an entrepreneurial ecosystem-financial or venture capital clusters on the exit of a startup through mergers and acquisitions (M&A). We find that probability of successful exit through M&A increases if the venture capitalist invested in the startup is in a venture capital (VC) cluster. Location of the startup in a top VC cluster is not significant for success once we control for the location of the VC in a top VC cluster.Our results are robust to different specifications of the models that use different time periods, reputation of VC, industry, and the quality of the startup company. Our results provide evidence for VCs, startups and policy makers who want to better understand the components of entrepreneurial ecosystems and their relation to the M&A exits of startups.

Keywords: startup financing; financial institutions; venture capital; financing clusters; mergers and acquisitions (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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