This Website uses cookies. By using this website you are agreeing to our use of cookies and to the terms and conditions listed in our data protection policy. Read more

North American Journal of Economics and Finance

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

Scientific Article in English
Reference
Kaya, Mehmet Caglar and Lars Persson (2019). “A Theory of Gazelle Growth: Competition, Venture Capital Finance and Policy”. North American Journal of Economics and Finance 50, 101019. doi.org/10.1016/j.najef.2019.101019

Authors
Mehmet Caglar Kaya, Lars Persson

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.