Publication Type
Journal Article
Publication Date
5-2015
Abstract
We propose a model of investment, duration, and exit strategies for start-ups backed by venture capital (VC) funds that accounts for the high level of uncertainty, the asymmetry of information between insiders and outsiders, and the discount rate. Our analysis predicts that start-ups backed by corporate VC funds remain for a longer period of time before exiting and receive larger investment amounts than those financed by independent VC funds. Although a longer duration leads to a higher likelihood of an exit through an acquisition, a larger investment increases the probability of an IPO exit. These predictions find strong empirical support.
Discipline
Corporate Finance | Entrepreneurial and Small Business Operations | Strategic Management Policy
Research Areas
Corporate Reporting and Disclosure
Publication
Journal of Economics and Management Strategy
Volume
24
Issue
2
First Page
415
Last Page
455
ISSN
1058-6407
Identifier
10.1111/jems.12097
Publisher
Wiley: 24 months
Citation
GUO, Bing; LOU, Yun; and PEREZ-CASTRILLO, David.
Investment, duration, and exit strategies for corporate and independent venture capital-backed start-ups. (2015). Journal of Economics and Management Strategy. 24, (2), 415-455.
Available at: https://ink.library.smu.edu.sg/soa_research/1696
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
http://doi.org/10.1111/jems.12097
Included in
Corporate Finance Commons, Entrepreneurial and Small Business Operations Commons, Strategic Management Policy Commons