Rapidly Evolving Technologies and Startup Exits

76 Pages Posted: 25 Sep 2018 Last revised: 31 Aug 2021

See all articles by Donald E. Bowen III

Donald E. Bowen III

Lehigh University

Laurent Frésard

Universita della Svizzera italiana (USI Lugano); Swiss Finance Institute

Gerard Hoberg

University of Southern California - Marshall School of Business - Finance and Business Economics Department

Date Written: August 31, 2021

Abstract

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

Bowen III, Donald E. and Frésard, Laurent and Hoberg, Gerard, Rapidly Evolving Technologies and Startup Exits (August 31, 2021). Swiss Finance Institute Research Paper No. 19-22, USC Marshall School of Business Research Paper Sponsored by iORB, No. Forthcoming, Available at SSRN: https://ssrn.com/abstract=3245839 or http://dx.doi.org/10.2139/ssrn.3245839

Donald E. Bowen III

Lehigh University ( email )

Bethlehem, PA 18015
United States

Laurent Frésard (Contact Author)

Universita della Svizzera italiana (USI Lugano) ( email )

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Gerard Hoberg

University of Southern California - Marshall School of Business - Finance and Business Economics Department ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

HOME PAGE: http://faculty.marshall.usc.edu/Gerard-Hoberg/

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