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Cross-border M&As of biotech firms affiliated with internationalized universities

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Abstract

This paper provides a conceptual and empirical account of the role of the firms’ affiliation with universities in the international market for assets. We investigate whether the prestige and the internationalization of a university affect the propensity of affiliated spin-offs to be targeted in cross-border M&As. This is because the affiliation with a prestigious university is expected to increase the technological capabilities and network opportunities of affiliated firms and to provide a more dynamic and mobile human capital. Moreover, in high tech markets the reputation of the affiliated university helps overcoming information asymmetry on the quality of the firm and its market value. Using a sample of 220 biotech firms that went public in Europe over the period 1995–2006, we find that firms affiliated with more prestigious and internationalized universities are more prone to be targeted in cross-border M&As. Results are robust to different methodologies, definitions and endogeneity of prestige and internationalization.

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Notes

  1. See Vismara et al. (2012) for a description of this database. Consistent with the definitions provided by Audretsch (2001), we identify biotech firms considering code 4573 of the Industry Classification Benchmark (ICB), which is composed by Healthcare (45), Pharmaceuticals & Biotechnology (7), and Biotechnology (3). The ICB is the official industry classification adopted by the European stock exchanges.

  2. Data on acquisitions include deals identified by the cut-off ownership levels for mandatory disclosures required by national laws, and deals where both the acquirer’s and the target’s country are known. All double-counting transactions are excluded. In all of the jurisdictions considered, there was a formal obligation requiring major shareholders to disclose their holdings in a company.

  3. Since the purpose of the prospectus is to sell shares, it is assumed that all relevant information will be included. Moreover, since owners and managers are legally accountable for errors in the document, it contains the most accurate information available. As a result, prospectus data are considered reliable and enjoy a longstanding role in strategy and entrepreneurship research (Shrader and Siegel 2007).

  4. Since our purpose is to measure university’s international collaborations in science, and being biotechnology not a separate field but rather a mix of disciplines transmuted into productive processes, we consider also patents in scientific areas such as chemical engineering, information technology, and robotics. Our results are consistent when we consider a tighter definition of biotechnology to filter university patents.

  5. Cassia et al. (2014), i.e., highlight how knowledge transfer activities are more developed in US entrepreneurship research centres than in in the equivalent EU structures.

  6. Firms belong to a cluster when they are located within 50 km from its centre, with the exception of the following clusters, where we consider the specific radius (km) reported in Chiaroni and Chiesa (2006): Cambridge (30), Heidelberg (40), Marseilles (30) and Milan (30). For the Biovalley cluster (Upper Rhine Valley), the city of Basel is the centre. A firm belongs to the Scot cluster if located within the triangle of Dundee, Edinburgh and Glasgow, or within 10 km from one of these cities.

  7. We consider the number of patents on which the firm had exclusive rights at the date of the IPO, as published in the prospectus. Such measure captures not only patents issued directly to the firm, but also patents acquired through arrangements with other firms. When missing, the patent variable was completed by measuring the number of patents as reported by the US and by the European Patent Office issued to the firm up to the date of the IPO.

  8. The upper echelon consists of board members and top managers. The benefits of having prestigious members in both categories at the time of IPO registration are well known. Executives with lustrous credentials and experience may be more capable of leading a company through the IPO transition, and prestigious outside directors can reassure markets that the firm will be able to secure scarce resources. In the regression analysis, we controlled for the relational and educational capital of the upper echelon (advisory role) as well as board-independence and corporate governance mechanisms (agency role). Bertoni et al. (2014) show that the relative importance of the two roles varies over time, with advisory (agency) dominating in IPOs of young (mature) companies. Relying on the definition of upper echelons allows us to better account for differences in the design and functioning of top management teams across national borders.

  9. The Heckman procedure allows us to create a selectivity instrument. We initially extract from the Bureau van Dijk’s Amadeus database a list of biotech firms that did not go public between 1990 and 2006. To match treatment units (IPO-firms) with control units (private firms), we first estimated the propensity scores, or fitted values, using the nearest-neighbor propensity scores. Then, we performed a logistic regression, where the predictive variables were firm size (revenues) and age (year of foundation) and country dummies. This regression was used to create the selectivity instrument that was included among the baseline regressors in our models.

  10. Top-ranked universities are here defined as the universities included in the top 15 positions of the ARWU ranking.

  11. Top-internationalized universities are here defined as the 15 universities with the highest percentages of international co-authored patents.

  12. The ARWU ranking does not include any scores for university internationalization, while the THES ranking assigns a 5 % weight to the percentage of full-time international professors and the percentage of full-time international students.

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Acknowledgments

We thank the participants at the 2012 Workshop on Academic Policy and the Knowledge Theory of Entrepreneurship in Augsburg (in particular, Alexander Starnecker), at the 2012 EUSPRI meetings in Milan (in particular, Annalisa Croce), at the CCSE 2012 Workshop in Bergamo (in particular, Erik E. Lehmann and Stefano Paleari), and at the 23rd AiIG conference (in particular, Davide Chiaroni and Giovanni Azzone) for useful discussions and helpful comments. We also thank two anonymous referees for their stimulating suggestions.

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Authors and Affiliations

  1. Department of Economics and Technology Management, University of Bergamo, Via Pasubio 7b, 24044, Dalmine, BG, Italy

    Mattia Cattaneo, Michele Meoli & Silvio Vismara

  2. CISAlpino Institute for Comparative Studies in Europe (CCSE), University of Bergamo, Dalmine, Italy

    Mattia Cattaneo, Michele Meoli & Silvio Vismara

  3. University of Augsburg, Augsburg, Germany

    Mattia Cattaneo, Michele Meoli & Silvio Vismara

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  1. Mattia Cattaneo
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Correspondence to Mattia Cattaneo.

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Cattaneo, M., Meoli, M. & Vismara, S. Cross-border M&As of biotech firms affiliated with internationalized universities. J Technol Transf 40, 409–433 (2015). https://doi.org/10.1007/s10961-014-9349-8

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