Role of Strategic Alliances in VC Exits: Evidence from the Biotechnology Industry
Posted: 27 Mar 2017 Last revised: 3 Jun 2019
Date Written: March 30, 2018
This paper contributes to a better understanding of the relationship between strategic alliances and VC exits. Recent empirical literature concludes that strategic alliances improve the probability of successful exits (IPOs and M&As) for venture-backed companies. When we control for observed and unobserved heterogeneity in a cohort sample of companies, for the self-selection into alliance activity, and for censoring, we find a lower effect than prior studies. Moreover, we confirm a positive effect of strategic alliances only for IPOs, but not for M&As. These findings are consistent with the view that strategic alliances help companies to certify their quality towards potential buyers. In addition, we challenge the pervasive assumption that alliances have temporally constant effects on VC exits.
Keywords: Strategic Alliance, Venture Capital, Biotechnology, IPO, M&A
JEL Classification: G24, L24, L26
Suggested Citation: Suggested Citation