A Theory of Gazelle Growth: Competition, Venture Capital Finance, and Policy

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A Theory of Gazelle Growth: Competition, Venture Capital Finance, and Policy. / Kaya, Mehmet Caglar; Persson, Lars.

In: North American Journal of Economics and Finance, Vol. 50, 101019, 11.2019.

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TY - JOUR

T1 - A Theory of Gazelle Growth: Competition, Venture Capital Finance, and Policy

AU - Kaya, Mehmet Caglar

AU - Persson, Lars

PY - 2019/11

Y1 - 2019/11

N2 - This paper proposes a theory of gazelle growth in which gazelles can grow either organically or through acquisitions. The model includes three types of firms: incumbent, target, and gazelle. We show that the lower cost of organic growth can increase the incentives for acquisition growth because the incumbent understands that if it acquires the target firm, the gazelle will then invest organically in order to grow, and therefore, the acquisition will not be enough to protect the incumbent's market power. The gazelle could then acquire the target firm at a good price. We also show that financial support for the organic growth of gazelles can increase gazelles’ growth through acquisitions because incumbents’ preemptive motives are reduced.

AB - This paper proposes a theory of gazelle growth in which gazelles can grow either organically or through acquisitions. The model includes three types of firms: incumbent, target, and gazelle. We show that the lower cost of organic growth can increase the incentives for acquisition growth because the incumbent understands that if it acquires the target firm, the gazelle will then invest organically in order to grow, and therefore, the acquisition will not be enough to protect the incumbent's market power. The gazelle could then acquire the target firm at a good price. We also show that financial support for the organic growth of gazelles can increase gazelles’ growth through acquisitions because incumbents’ preemptive motives are reduced.

UR - http://www.scopus.com/inward/record.url?scp=85069581562&partnerID=8YFLogxK

U2 - 10.1016/j.najef.2019.101019

DO - 10.1016/j.najef.2019.101019

M3 - Article

AN - SCOPUS:85069581562

VL - 50

JO - North American Journal of Economics and Finance

JF - North American Journal of Economics and Finance

SN - 1062-9408

M1 - 101019

ER -