Rapidly Evolving Technologies and Startup Exits
76 Pages Posted: 25 Sep 2018 Last revised: 31 Aug 2021
Date Written: August 31, 2021
This paper examines startups’ positioning within technological cycles. We use patent text to measure whether innovation pertains to a technological area that is rapidly evolving or stable. We show that innovation in rapidly evolving areas (i.e., early in the cycle) substitute for existing technologies, whereas innovation in stable areas (i.e., later in the cycle) complement them. Our new measure is distinct from existing characterizations of innovation and is economically important. We find that startups in rapidly evolving areas tend to exit via IPO, thus remaining independent, consistent with technological substitution. In contrast, startups in stable areas tend to sell-out, consistent with technological complementarity and synergies.
Keywords: Startup Exit, Initial Public Offerings (IPOs), Acquisitions, Sell-Outs, Technology Substitution, Venture Capital
JEL Classification: G32, G34, G24
Suggested Citation: Suggested Citation