Venture Capital, IPOs and Corporate Innovation

Lex Research Topics in Corporate Law & Economics Working Paper No. 2013-4

19 Pages Posted: 26 Jul 2013

See all articles by Joseph A. McCahery

Joseph A. McCahery

Tilburg University - School of Law; European Banking Center (EBC); Tilburg Law and Economics Center (TILEC); European Corporate Governance Institute (ECGI)

Erik P. M. Vermeulen

Tilburg University - Department of Business Law; Philips Lighting - Legal Department; Tilburg Law and Economics Center (TILEC); European Corporate Governance Institute (ECGI); Kyushu University - Graduate School of Law

Date Written: July 25, 2013

Abstract

One important effect of the sluggish IPO market is the focus on deregulation and the emergence of a new generation of securities markets. These deregulated markets are considered important to stimulate entrepreneurial activity and attract venture capital. This paper argues that the introduction of these new markets and accompanying deregulatory measures exhibits a surprisingly low success rate.

There are several reasons for this. First, founders of emerging growth companies increasingly believe that it is in their best interest to remain private as long as possible. Second, we show how the decline of IPOs has led venture capitalists and entrepreneurs to access other exit routes. Trade sales have become the preferred exit option for most investments in growth companies. Third, we observe that mature corporations show an increased interest in hiring or collaborating with venture capitalists (to improve the innovation outcomes of the mature corporations). Fourth, by using case illustrations from the corporate venture capital industry, we highlight the wide variety of new collaborative venture capital models (which will arguably pave the way to even more trade sales with higher exit values in the future).

Keywords: corporate governance, corporate venturing, entrepreneurship, initial public offering (IPO), innovation, trade sales, value creation, venture capital

JEL Classification: G01, G24, G34, K20, K22, L22, L26, O16, O31

Suggested Citation

McCahery, Joseph A. and Vermeulen, Erik P.M., Venture Capital, IPOs and Corporate Innovation (July 25, 2013). Lex Research Topics in Corporate Law & Economics Working Paper No. 2013-4. Available at SSRN: https://ssrn.com/abstract=2298315 or http://dx.doi.org/10.2139/ssrn.2298315

Joseph A. McCahery

Tilburg University - School of Law; European Banking Center (EBC) ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands
+31-(0)13-466-2306 (Phone)
+31-(0)13-466-2323 (Fax)

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Erik P.M. Vermeulen (Contact Author)

Tilburg University - Department of Business Law ( email )

Philips Lighting - Legal Department ( email )

Amstelplein 2
Amsterdam
Netherlands

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Kyushu University - Graduate School of Law ( email )

6-19-1, Hakozaki, Higashiku
Fukuoka, 812-8581
Japan

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