Born to flip. Exit decisions of entrepreneurial firms in high-tech and low-tech industries
By Elena Cefis, Orietta Marsili. 2011
125 citations recorded by the source corpus.
This paper examines the way that the exit behavior of entrepreneurial firms is shaped by their innovative capabilities, and the technology environment in which they operate. We distinguish between exit by closing down activity and exit by merger or acquisition (M&A). Using a large sample of Dutch manufacturing firms, we explore the relationship between firm exit, age and innovative capabilities, in high and low innovation intensive industries. We find that for entrepreneurial firms, innovation may go some way towards compensating for the liability of newness, but also makes them more attractive M&A targets. More specifically, entrepreneurial firms in high-tech industries do not seem to improve their chances of survival by innovating; when technological change is rapid, innovation, especially in products, is necessary to participate in the innovation race in an industry, but is not sufficient to guarantee survival. In contrast, in low-tech industries, process innovation is a critical condition for the survival of entrepreneurial firms. In this context, entrepreneurial firms that are able to bring new product ideas, introducing ‘exceptional’ variations into a stable environment, are most likely to exit by M&A, thereby transferring their knowledge and capabilities to the incumbent firms.
Subfields: Economics and Econometrics, Management of Technology and Innovation, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/0220b1fbad260d9f7740c92cc06c55d87e39c184
Citations in the corpus
- Going, going, gone: exit forms and the innovative capabilities of firms (2012, unknown): “Similarly, an exit by M&A is more likely to occur when public Internet-related firms hold high value patents prior to the IPO (Cockburn and Wagner 2010), and for new firms introducing innovative products in low-tech industries (Cefis and Marsili 2011).”
- The Schumpeterian entrepreneur: a review of the empirical evidence on the antecedents, behaviour and consequences of innovative entrepreneurship (2017, unknown): “Exit by trade sale, M&A, and IPO are important exit options for innovative new ventures (Giot and Schwienbacher 2007; Wennberg et al. 2010; Arora and Nandkumar 2011; Henkel, Rønde, and Wagner 2015).”