Advertisement

Small Business Economics

, Volume 40, Issue 2, pp 227–248 | Cite as

Completing the technology transfer process: M&As of science-based IPOs

  • Michele Meoli
  • Stefano Paleari
  • Silvio VismaraEmail author
Article

Abstract

This paper investigates the valuation and merger and acquisition (M&A) dynamics of the population of 254 biotech firms that went public in Europe between 1990 and 2009. Among these, we identify a high proportion (40%) of firms affiliated with a university or another public research organization. After controlling for intellectual capital and other possible determinants, we find that affiliation with a university is recognized as beneficial by investors. This affiliation enhances the valuation of the firms and the probability of being targeted in subsequent M&As, particularly in cross-border deals. We conclude that following the initial public offering acquisitions by incumbent firms are mechanisms to finalize the technology transfer process started in a research institute. Our findings allow us to derive implications for venture investors, academic entrepreneurs, university managers, and policymakers.

Keywords

Technology transfer Academic entrepreneurship University-firm relations IPOs M&As 

JEL Classifications

G34 M13 O32 L26 

Notes

Acknowledgments

We have benefited from discussions with Massimo Colombo, Erik Lehmann, and Jay Ritter, and with colleagues at Bocconi University, University of Bergamo, and University of Padua, that lead us in particular to better develop the theoretical framework of the paper. We would also like to thank participants at the XX AiIG conference in Udine and at the Technology Transfer Society (T2S) conference in Greensboro.

References

  1. Arthurs, J. D., Busenitz, L. W., Hoskisson, R. E., & Johnson, R. A. (2009). Firm-specific human capital and governance in IPO firms: Addressing agency and resource dependence concerns. Entrepreneurship Theory and Practice, 33(4), 845–865.CrossRefGoogle Scholar
  2. Audretsch, D. B., Hulsbeck, M., & Lehmann, E. E. (2011). Regional competitiveness, university spillovers, and entrepreneurial activity. Small Business Economics (forthcoming).Google Scholar
  3. Audretsch, D. B., & Lehmann, E. E. (2006). Entrepreneurial access and absorption of knowledge spillovers: Strategic board and managerial composition for competitive advantage. Journal of Small Business Management, 44(2), 155–166.CrossRefGoogle Scholar
  4. Audretsch, D. B., Lehmann, E. E., & Warning, S. (2005). University spillovers and new firm location. Research Policy, 34(7), 1113–1122.CrossRefGoogle Scholar
  5. Bonardo, D., Paleari, S., & Vismara, S. (2010). The M&A dynamics of European science-based entrepreneurial firms. Journal of Technology Transfer, 35(1), 141–180.CrossRefGoogle Scholar
  6. Bonardo, D., Paleari, S., & Vismara, S. (2011). Valuing university spin-offs: The effects of academic affiliation on IPO performance. Entrepreneurship: Theory and Practice, 35(4), 755–776.CrossRefGoogle Scholar
  7. Booth, J. R., & Smith, R. (1986). Capital raising underwriting and the certification hypothesis. Journal of Financial Economics, 15, 261–281.CrossRefGoogle Scholar
  8. Braun, T. V., Lehmann, E. E., & Schwerdtfeger, M. T. (2011). The stock market evaluation of IPO firm takeovers. Working paper. doi: 10.2139/ssrn.1803358.
  9. Carter, R. B., & Manaster, S. (1990). Initial public offerings and underwriter reputation. Journal of Finance, 65, 1045–1067.CrossRefGoogle Scholar
  10. Certo, S. T. (2003). Influencing initial public offering investors with prestige: Signaling with board structures. Academy of Management Review, 28, 432–446.Google Scholar
  11. Chen, G., Hambrick, D. C., & Pollock, T. G. (2008). Puttin’ on the ritz: Pre-IPO enlistment of prestigious affiliates as deadline-induced remediation. Academy of Management Journal, 51, 954–975.CrossRefGoogle Scholar
  12. Clarysee, B., Wright, M., & Van de Velde, E. (2011). Entrepreneurial origin, technology endowments and the growth of spin-off companies. Journal of Management Studies, 48(6), 1420–1442.CrossRefGoogle Scholar
  13. Coff, R. W. (1999). How buyers cope with uncertainty when acquiring firms in knowledge-intensive industries: Caveat emptor. Organization Science, 10, 144–161.CrossRefGoogle Scholar
  14. Cogliati, G. M., Paleari, S., & Vismara, S. (2011). IPO pricing: Growth rates implied in offer prices. Annals of Finance, 7(1), 53–82.CrossRefGoogle Scholar
  15. Colombo, M., Mustar, P., & Wright, M. (2010). Dynamics of science-based entrepreneurship. Journal of Technology Transfer, 35(1), 1–15.CrossRefGoogle Scholar
  16. Eun, C. S., Kolodny, R., & Scheraga, C. (1996). Cross-border acquisitions and shareholder wealth: Test of the synergy and internalization hypothesis. Journal of Banking & Finance, 20, 1559–1582.CrossRefGoogle Scholar
  17. European Commission. (2005). Improving opportunities for Initial Public Offerings on growth stock markets in Europe. Report from the workshop held on 24 May 2005 in Brussels, Directorate-General for Enterprise and Industry.Google Scholar
  18. Filatotchev, I., Toms, S., & Wright, M. (2006). The firm’s strategic dynamics and corporate governance lifecycle. International Journal of Managerial Finance, 2(4), 256–279.CrossRefGoogle Scholar
  19. Fischer, H. M., & Pollock, T. G. (2004). Effects of social capital and power on surviving transformational change: The case of initial public offerings. Academy of Management Journal, 47, 463–481.CrossRefGoogle Scholar
  20. Glunk, U., Heijltjes, M. G., & Olie, R. (2001). Design characteristics and functioning of top management teams in Europe. European Management Journal, 19(3), 291–300.CrossRefGoogle Scholar
  21. Granstrand, O., & Sjölander, S. (1990). The acquisition of technology and small firms by large firms. Journal of Economic Behavior & Organization, 13(3), 367–386.CrossRefGoogle Scholar
  22. Gulati, R., Nohria, N., & Zaheer, A. (2000). Strategic networks. Strategic Management Journal, 21, 203–215.CrossRefGoogle Scholar
  23. Hand, J. R. M. (2007). Determinants of the round-to-round returns to pre-IPO venture capital investments in U.S. biotechnology companies. Journal of Business Venturing, 22(1), 1–28.CrossRefGoogle Scholar
  24. Hess, A. M., & Rothaermel, F. T. (2011). When are assets complementary? Star scientists, strategic alliances and innovation in the pharmaceutical industry. Strategic Management Journal, 32(8), 895–909.CrossRefGoogle Scholar
  25. Higgins, M. C., & Gulati, R. (2006). Stacking the deck: The effect of upper echelon affiliations for entrepreneurial firms. Strategic Management Journal, 27, 1–26.CrossRefGoogle Scholar
  26. Hovakimian, A., & Hutton, I. (2010). Merger-motivated IPOs. Financial Management, 39, 1547–1573.CrossRefGoogle Scholar
  27. Hsieh, J., Lyandres, E., & Zhdanov, A. (2011). A theory of merger-driven IPOs. Journal of Financial and Quantitative Analysis, 46(5), 1367–1405.Google Scholar
  28. Inkpen, A., Sundaram, A. K., & Rockwood, K. (2000). Cross-border acquisitions of US technology assets. California Management Review, 42(3), 50–67.CrossRefGoogle Scholar
  29. Johnson, J. M., & Regets, M. (1998). International mobility of scientists and engineers to the United States—Brain drain or brain circulation? Arlington, VA: National Science Foundation, pp. 98–316.Google Scholar
  30. Knockaert, M., Ucbasaran, D., Wright, M., & Clarysse, B. (2011). The relationship between knowledge transfer, top management team composition and performance: The case of science based entrepreneurial firms. Entrepreneurship, Theory and Practice, 35(4), 777–803.CrossRefGoogle Scholar
  31. Lehmann, E. E., Braun, T. V., & Krispin, S. (2011). Entrepreneurial human capital, complementary assets, and takeover probability. Journal of Technology Transfer (forthcoming).Google Scholar
  32. Lichtenberg, F. R., & Siegel, D. (1989). The effects of leveraged buyouts on productivity and related aspects on firms’ behaviour. Journal of Financial Economics, 27, 165–194.CrossRefGoogle Scholar
  33. Megginson, W. L., & Weiss, K. (1991). Venture capitalist certification in initial public offerings. Journal of Finance, 46, 879–903.CrossRefGoogle Scholar
  34. Mustar, P., & Wright, M. (2010). Convergence or path dependency in policies to foster the creation of university spin-off firms? A comparison of France and the United Kingdom. Journal of Technology Transfer, 35(1), 42–65.CrossRefGoogle Scholar
  35. Nelson, T. (2003). The persistence of founder influence: Management, ownership, and performance effects at initial public offering. Strategic Management Journal, 24, 707–724.CrossRefGoogle Scholar
  36. O’ Shea, R. P., Chugh, H., & Allen, T. J. (2008). Determinants and consequences of university spin-off activity: A conceptual framework. Journal of Technology Transfer, 33, 653–666.CrossRefGoogle Scholar
  37. Pollock, T. G., Chen, G., Jackson, E. M., & Hambrick, D. C. (2010). How much prestige is enough? Assessing the value of multiple types of high-status affiliates for young firms. Journal of Business Venturing, 25(1), 6–23.CrossRefGoogle Scholar
  38. Pollock, T. G., & Gulati, R. (2007). Standing out from the crowd: the visibility-enhancing effects of IPO-related signals on alliance formation by entrepreneurial firms. Strategic Organization, 5, 339–374.CrossRefGoogle Scholar
  39. Powell, W. W., Koput, K. W., & Smith-Doerr, L. (1996). Interorganizational collaboration and the locus of innovation: Networks of learning in biotechnology. Administrative Science Quarterly, 41, 116–145.CrossRefGoogle Scholar
  40. Rao, H. (1994). The social construction of reputation: Certification contests, legitimation, and the survival of organizations in the American automobile industry: 1895–1912. Strategic Management Journal, 15, 29–44.CrossRefGoogle Scholar
  41. Schmidt, T., & Sofka, W. (2009). Liability of foreignness as a barrier to knowledge spillovers: Lost in translation? Journal of International Management, 15(4), 460–474.CrossRefGoogle Scholar
  42. Shane, S. (2004). Encouraging university entrepreneurship. The effect of the Bayh-Dole Act on university patenting in the United States. Journal of Business Venturing, 19, 127–151.CrossRefGoogle Scholar
  43. Shen, J. C., & Reuer, J. J. (2005). Adverse selection in acquisitions of small manufacturing firms: A comparison of private and public targets. Small Business Economics, 24(4), 393–407.CrossRefGoogle Scholar
  44. Stuart, T. E., Hoang, H., & Hybels, R. C. (1999). Inter organizational endorsements and the performance of entrepreneurial ventures. Administrative Science Quarterly, 44, 315–349.CrossRefGoogle Scholar
  45. Teece, D. J. (1986). Profiting from technological innovation. Research Policy, 15(6), 285–305.CrossRefGoogle Scholar
  46. Vismara, S., Paleari, S., & Ritter, J. R. (2011). Europe’s second markets for small companies. European Financial Management (forthcoming).Google Scholar
  47. Wright, M., Lockett, A., Clarysse, B., & Binks, M. (2006). University spin-out companies and venture capital. Research Policy, 35, 481–501.CrossRefGoogle Scholar
  48. Zaheer, S. (1995). Overcoming the liability of foreignness. Academy of Management Journal, 38, 341–363.CrossRefGoogle Scholar
  49. Zhang, J. (2009). The performance of university spin-offs: An exploratory analysis using venture capital data. Journal of Technology Transfer, 34, 255–285.CrossRefGoogle Scholar
  50. Zheng, Y., Liu, J., & George, G. (2010). The dynamic impact of innovative capability and inter-firm network on firm valuation: A longitudinal study of biotechnology start-ups. Journal of Business Venturing, 25(6), 593–609.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media, LLC. 2012

Authors and Affiliations

  • Michele Meoli
    • 1
  • Stefano Paleari
    • 1
  • Silvio Vismara
    • 1
    Email author
  1. 1.Department of Economics and Technology ManagementUniversity of Bergamo and CISAlpino Institute for Comparative Studies in Europe (CCSE)DalmineItaly

Personalised recommendations