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Entrepreneurial external resource acquisition and exit via IPO

Peng, B. (2017). Entrepreneurial external resource acquisition and exit via IPO. (Unpublished Doctoral thesis, City, University of London)


This dissertation focuses on entrepreneurial finance and exit strategies via IPO. Three quantitative studies have been conducted based on a dataset of entrepreneurial firms listed for the first time in the London Stock Exchange (LSE) between 2002 and 2012. Initial Public Offering (IPO), as a major event for external resource acquisition, is a milestone in both the life of an entrepreneurial venture and the entrepreneur himself. How to gain a good performance in IPO? What factors drive their leave from the business they set up after IPO? And whether and how the founder's leave after IPO may affect the subsequent performance of the business? These questions become main concerns for both entrepreneurs and investors. The three studies in the dissertation address these issues from different perspectives. Since the research questions and test variables are different across studies, the sample size for each empirical study is slightly different from each other.

The first study extends our understanding of the categorical imperative by exploring how the category spanning behavior of the main founders may harm their resource acquisition via IPO, as well as the way they offset such penalty. This question was tested using main founders of 173 startups listed for the first time in the Alternative Investment Market (AIM) of LSE. The study supports the past literature confirming that, compared to IPO firms whose founders specialise in one industry or one function, those founded by category spanners are generally devalued by investors. However, such devaluation is less severe in case founders are partly hybrid, spanning categories in one dimension (either for industry or function) but being a specialist in the other dimension. The results also show that an external expert endorsement can offset the penalty of hybridity, especially when hybridity occurs along multiple dimensions.

The second study explores variance in the exit decisions of founders after IPO, and examines factors explaining these decisions. Through analyzing the exit behaviour of 313 founders at 177 entrepreneurial firms listed in the main and alternative market of LSE, we find that power structure is associated with founders' total exit but does not equally well explain partial exits behaviors (i.e. financial or managerial). Moreover, the effect of power on total exit is also moderated by the type of capital market in which the IPO takes place [main market of the LSE versus Alternative Investment Market (AIM)].

The third study examines whether and how different founder exit strategies influence a firm's operational and stock performance. We find that while the post-IPO departure of the main founder is related to a short-term drop of the stock performance, in the long-run, it is positively related with the firm's financial performance.

Publication Type: Thesis (Doctoral)
Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Departments: Bayes Business School
Doctoral Theses
Bayes Business School > Bayes Business School Doctoral Theses
Text - Accepted Version
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