Abstract

In identifying entrepreneurial exit as a critical component of the entrepreneurial process, DeTienne (2010) posed the question, “what conditions cause an entrepreneur to choose a particular exit?” Implicit in this question is the notion that the seller is in control of exit outcomes. However, without a buyer, acquisition is eliminated as an exit outcome, leaving exit to occur by closure and/or liquidation (sometimes referred to as failure, e.g. van Teeffelen & Uhlaner, 2012). We focus this paper on the role played by the acquirer in entrepreneurial exit.

Financial and strategic acquirers are the two distinct types of acquirers noted in practitioner- focused literature, (e.g. McKaskill, 2010). In other contexts, scholars have used real options theory to explore acquisitions from the perspective of the exiting owner (McGrath 1998). We utilize real options theory to explore why entrepreneurial firms are acquired. Specifically, we focus on the following research questions:

RQ1: Between financial and strategic buyers, are there differences in real options in acquisition targets? If so, what are they?

RQ2: Among financial and strategic buyers, are there differences in real options in acquisition targets? If so, what are they?

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