The M&A dynamics of European science-based entrepreneurial firms

This paper investigates the dynamics of a sample of 131 Science-Based Entrepreneurial Firms (SBEFs), selected out of 500 innovative SMEs that went public in Europe in the period 1995-2003. We found that the market for the control of these firms was active, with most of our sample firms being acquired after the Initial Public Offering (IPO), especially by companies operating within the same industry. SBEFs showed a higher propensity to be acquired than independent firms, even controlling for intellectual capital and other possible determinants. While university affiliation enhanced attractiveness in the eyes of other companies, it negatively affected the propensity to acquire. The higher availability of internal technological resources was an important determinant of the decreased propensity of SBEFs to pursue acquisitions. We argue that university-based firms do contribute to the technology transfer process, as evidenced by the widespread interest of the business world in investing in these firms. The creation of a SBEF is a first step in the process of commercial exploitation of university-research, while the subsequent step of going public is a sign of the success of this entrepreneurial venture. The take-over of SBEFs may be a final outcome of the process of knowledge diffusion.