Born to flip. Exit decisions of entrepreneurial firms in high-tech and low-tech industries

Elena Cefis, Orietta Marsili

Research output: Contribution to journalArticle

31 Citations (Scopus)
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Abstract

This paper examines the way that the exit behavior of entrepreneurial firms is shaped by their innovative capabilities, and the technology environment in which they operate. We distinguish between exit by closing down activity and exit by merger or acquisition (M&A). Using a large sample of Dutch manufacturing firms, we explore the relationship between firm exit, age and innovative capabilities, in high and low innovation intensive industries. We find that for entrepreneurial firms, innovation may go some way towards compensating for the liability of newness, but also makes them more attractive M&A targets. More specifically, entrepreneurial firms in high-tech industries do not seem to improve their chances of survival by innovating; when technological change is rapid, innovation, especially in products, is necessary to participate in the innovation race in an industry, but is not sufficient to guarantee survival. In contrast, in low-tech industries, process innovation is a critical condition for the survival of entrepreneurial firms. In this context, entrepreneurial firms that are able to bring new product ideas, introducing ‘exceptional’ variations into a stable environment, are most likely to exit by M&A, thereby transferring their knowledge and capabilities to the incumbent firms.
Original languageEnglish
Pages (from-to)473-498
Number of pages26
JournalJournal of Evolutionary Economics
Volume21
Issue number3
Early online date5 Jan 2011
DOIs
Publication statusPublished - 1 Aug 2011

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Entrepreneurial firms
High-tech
Industry
Exit
Innovation
Innovative capability
Technological change
Incumbents
Manufacturing firms
New products
Guarantee
High-tech industry
Firm exit
Process innovation
Liability of newness
Mergers

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Born to flip. Exit decisions of entrepreneurial firms in high-tech and low-tech industries. / Cefis, Elena; Marsili, Orietta.

In: Journal of Evolutionary Economics, Vol. 21, No. 3, 01.08.2011, p. 473-498.

Research output: Contribution to journalArticle

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