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Effect of Financial Clusters on Startup Mergers and Acquisitions

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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
    Deceased.)

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.

Suggested Citation

  • Saurabh Ahluwalia & Sul Kassicieh, 2021. "Effect of Financial Clusters on Startup Mergers and Acquisitions," IJFS, MDPI, vol. 10(1), pages 1-13, December.
    • Handle: RePEc:gam:jijfss:v:10:y:2021:i:1:p:1-:d:710194
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    References listed on IDEAS

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    4. Nahata, Rajarishi & Hazarika, Sonali & Tandon, Kishore, 2014. "Success in Global Venture Capital Investing: Do Institutional and Cultural Differences Matter?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 49(4), pages 1039-1070, August.
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    Cited by:

    1. Saurabh Ahluwalia & Sul Kassicieh, 2024. "Pathways to Success: The Interplay of Industry and Venture Capital Clusters in Entrepreneurial Company Exits," JRFM, MDPI, vol. 17(4), pages 1-16, April.
    2. Shai Harel & Eliran Solodoha & Stav Rosenzweig, 2022. "Can Entrepreneurs Who Experienced Business Closure Bring Their New Start-Up to a Successful M&A?," JRFM, MDPI, vol. 15(9), pages 1-17, August.
    3. Mona Razaghzadeh Bidgoli & Iman Raeesi Vanani & Mehdi Goodarzi, 2024. "Predicting the success of startups using a machine learning approach," Journal of Innovation and Entrepreneurship, Springer, vol. 13(1), pages 1-27, December.

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