Entrepreneurial Human Capital, Complementary Assets, and Takeover Probability

Abstract

Although acquisitions of high tech entrepreneurial firms are of great popularity, the limited empirical evidence shows that these acquisitions often lead to dismal results in that a large number of acquired inventors leave the company after the acquisition and those that remain exhibit poor performance. This study tries to explain this phenomenon and adds additional empirical results and explanations which are based on the seminal work of Grossman, Hart, and Moore. Using a hand collected dataset of all German IPOs from 1997 until 2006 we show that the takeover probability of young and high tech firms significantly decreases with the amount of patents as a measure of intangible and complementary assets owned by the owner-manager.

Keywords: ownership structure, property rights, mergers & acquisitions

JEL Classification: G32, D23, G34