The role of strategic alliances in VC exits: evidence from the biotechnology industry

Venture Capital, vol. 22, pp. 281–313

Abstract

In this study, we analyze the impact of strategic alliances on VC exits. We explicitly ask whether strategic alliances may serve as a certifying device for new potential investors and whether the role alliances play differs in IPO and M&As. We hypothesize that strategic alliances serve as a certifying device particularly in instances with many uninformed buyers (IPOs) but not when there is a single buyer (M&As). To empirically test this hypothesis, we draw on a sample of 663 US VC-backed biotechnology companies founded between 2004 and 2008. We explicitly control for observed and unobserved heterogeneity in our cohort sample, alleviate concerns relating to self-selection into alliance activity, and assuage methodological concerns with respect to censoring. Our findings suggest that alliances improve the probability of successful exits for IPOs, but not for M&As. Moreover, we find a smaller effect than prior studies do.

Authors 3

1. Leonhard Brinster

   University of Hohenheim

   Affiliation as printed

   Chair of Corporate Finance, University of Hohenheim, Stuttgart, Germany

2. Christian Hopp Aachen Chair of Technology Entrepreneurship

   RWTH Aachen University · Bern University of Applied Sciences

   Affiliation as printed

   Business School, Bern University of Applied Sciences, Bern, Switzerland

   Chair of Technology Entrepreneurship, RWTH Aachen University, Aachen, Germany

3. Tereza Tykvová corresponding

   University of St.Gallen

   Affiliation as printed

   Chair of Private Markets and Alternative Investments, University of St. Gallen, St. Gallen, Switzerland