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The M&A Exit Outcome of High-Tech Startups

Author

Listed:
  • Carmen Cotei

    (University of Hartford, USA)

  • Joseph Farhat

    (Central Connecticut State University, USA)

Abstract

In this paper we analyze which factors explain the M&A exit outcome of high-technology startups using the confidential version of the Kauffman Firm Survey data. Our findings reveal that innovation activity is the most important factor in explaining the M&A exit outcome which indicates that acquirers value the growth potential signaled through intellectual property rights, research and development activity and therefore, businesses with high quality innovations are the most attractive targets for acquisitions. We also show that new, high-tech ventures owned by highly educated entrepreneurs are more likely to exit via M&A. These owners have better access to financial and social capital, which positively impacts the entrepreneur’s ability to create a business that is harvestable and increases the chance that the business will, indeed, be harvested.

Suggested Citation

  • Carmen Cotei & Joseph Farhat, 2020. "The M&A Exit Outcome of High-Tech Startups," Multinational Finance Journal, Multinational Finance Journal, vol. 24(3-4), pages 183-209, September.
    • Handle: RePEc:mfj:journl:v:24:y:2020:i:3-4:p:183-209
    as

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    References listed on IDEAS

    as
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    3. Audretsch, David B, 1991. "New-Firm Survival and the Technological Regime," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 441-450, August.
    4. Audretsch, David B. & Bönte, Werner & Mahagaonkar, Prashanth, 2012. "Financial signaling by innovative nascent ventures: The relevance of patents and prototypes," Research Policy, Elsevier, vol. 41(8), pages 1407-1421.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    mergers and acquisitions; entrepreneurial exit; innovation; technology-based startups;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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