Strategic alliances, venture capital, and exit decisions in early stage high-tech firms

Journal Article (Journal Article)

We study the trade-offs that biotech start-ups face in the private equity market when they choose between raising firm-level capital from venture capitalists or project-level capital from strategic alliance partners. Increased alliance activity makes future alliances more likely, but future VC activity less likely. In contrast, venture capital (VC) activity makes both future alliance and future VC activity more likely. Both types of private capital raise the hazard of going public. Acquisition as an alternative to initial public offering is made more likely by increased VC activity, but the link between acquisition probabilities and alliance activity is less clear-cut. These results highlight both the importance of alliance partners in resolving asymmetric information problems in the capital acquisition process and the potential conflict of interest between different sources of private equity. © 2012.

Full Text

Duke Authors

Cited Authors

  • Ozmel, U; Robinson, DT; Stuart, TE

Published Date

  • March 1, 2013

Published In

Volume / Issue

  • 107 / 3

Start / End Page

  • 655 - 670

International Standard Serial Number (ISSN)

  • 0304-405X

Digital Object Identifier (DOI)

  • 10.1016/j.jfineco.2012.09.009

Citation Source

  • Scopus