Does acquisition lead to the growth of high-tech scale-ups? Evidence from Europe

• Published in: Research in international business and finance Vol. 64; p. 101820
• Main Authors: Burger, Anže, Hogan, Teresa, Kotnik, Patricia, Rao, Sandeep, Sakinç, Mustafa Erdem
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.01.2023; Elsevier
• Subjects: Acquisitions; Cross-border acquisitions; Domestic acquisitions; Firm growth; High-tech scaleups; Propensity-score matching; Quantitative Finance; Acquisitions; Cross-border acquisitions; Propensity-score matching; L26; F21; D22; Domestic acquisitions; High-tech scaleups; G34; Firm growth
• ISSN: 0275-5319; 1878-3384
• DOI: 10.1016/j.ribaf.2022.101820

The post-acquisition growth of high-tech scaleups has received relatively little research attention. This is surprising since buyers are known to target these firms for growth opportunities whilst sellers increasingly seek strategic partners to access resources to scale their ventures. We examine the post-acquisition revenue and employment growth of high-tech scaleups in a multi-country setting, comprising five European economies. Using a propensity-score matching approach and difference-in-differences regression, for a sample of 2187 high-tech scaleups, we demonstrate that acquisition has a positive effect on target firms equivalent to cumulative growth of revenue (employment) of 9–13 (6−10) percent after five (four) years, relative to control firms. We find that nationality matters such that the targets of foreign-owned acquirers exhibit significantly higher cumulative revenue and employment growth than their domestic counterparts. Taking a longer-term perspective, we show that growth dips in the first year, then stabilizes and accelerates in the years following acquisition, indicating a period of adjustment. [Display omitted] •Acquisition leads to revenue and employment growth of private high-tech targets.•Nationality matters: targets of foreign-owned acquirers grow and adjust faster.•"Liability of foreignness" is less evident in the high-tech sector.•Short vs. long-term effects: growth dips in the first year, then accelerates.•The results are robust for different propensity score matching methods.