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Technological Disruptiveness and the Evolution of IPOs and Sell-Outs

2019; RELX Group (Netherlands); Linguagem: Inglês

10.2139/ssrn.3478503

1556-5068

Donald E. Bowen, Laurent Frésard, Gerard Hoberg,

Firm Innovation and Growth

Using novel text-based measures of patents from 1930 to 2010, we study VC- backed startups' exit choices. We show that startups with ex-ante disruptive technologies are more (less) likely to exit via IPO (sell-out). These cross sectional results are consistent with IPOs being favored by firms with the potential to carve out independent market positions, avoiding the need to share gains with an acquirer. In time series, we document a new 80-year economy-wide trend of declining technological disruptiveness. Together, these findings predict a shift in exits, which explains 20% of the recent decline in IPOs, and 49% of the surge in sell-outs.