Thorsten V. Braun, Sebastian Krispin, Erik E. Lehmann
Entrepreneurial Human Capital, Complementary
Assets, and Takeover Probability
Abstract:
Gaining access to technologies, competencies, and knowledge is observed
as one of the major motives for corporate mergers and acquisitions. In
this paper we show that a knowledge-based firm’s probability
of being a takeover target is influenced by whether relevant specific
human capital aimed for in acquisitions is directly accumulated within
a specific firm or is bound to its founder or manager owner.
We analyze the incentive effects of different arrangements of ownership
in a firm’s assets in the spirit of the Grossman-Hart-Moore
incomplete contracts theory of the firm. This approach highlights the
organizational significance of ownership of complementary assets. In a
small theoretical model we assume that the entrepreneur’s
specific human capital, as measured by the patents they own, and the
physical assets of their firm are productive only when used together.
Our results show that it is not worthwhile for an acquirer to purchase
the alienable assets of this firm due to weakened incentives for the
initial owner. Regression analysis using a hand collected dataset of
all German IPOs in the period from 1997 to 2006 subsequently provides
empirical support for this prediction.
This paper adds to previous research in that it puts empirical evidence
to the Grossman-Hart-Moore framework of incomplete contracts or
property rights respectively. Secondly, we show that relevant specific
human capital that is accumulated by a firm’s founder or
manager owner significantly decreases that firm’s probability
of being a takeover target.
JEL: G32, D23, G34
Paper:
Paper available as pdf-file.
Beitrag Nr. 307, Volkswirtschaftliche Diskussionsreihe, Institut
für
Volkswirtschaftslehre der Universität Augsburg
Contact:
Thorsten
V. Braun, University of Augsburg, Chair of Management and
Organization, D-86135 Augsburg, phone +49-821-598-4166, fax
+49-821-598-4228
Sebastian
Krispin, University of Augsburg, Department of
Economics,
D-86135
Augsburg,
Germany, phone +49-821-598-4199, fax +49-821-598-4230
E-Mail: sebastian.krispin@wiwi.uni-augsburg.de
Erik
E. Lehmann, University of Augsburg, Chair of
Management and Organization, D-86135 Augsburg, phone
+49-821-598-4163, fax
+49-821-598-4228
email: erik.lehmann@wiwi.uni-augsburg.de
v.
K., 14.12.2009