%0 Journal Article
%T Start-ups, incumbents, and the effects of takeover competition
%A Becker, Jan U.
%A Clement, Michel
%A Nöth, Marcus
%D 2016
%J Journal of Business Research
%@ 0148-2963
%N 12
%V 69
%P 5925–5933
%! Becker, Clement et al. 2016 – Start-ups, incumbents
%R 10.1016/j.jbusres.2016.05.005
%X Recent acquisitions involving Tumblr and Instagram have demonstrated that the takeover of an unlisted start-up company can offer enormous financial benefits to its (former) stakeholders. Considering the multimillion-dollar amounts paid for start-ups with no existing and highly uncertain future revenues, we investigate the process and outcome of negotiation dynamics in the context of takeovers. In a series of experiments, we show that even with a low level of uncertainty about a start-up's value and its financial resources, start-ups can influence bidders' behavior and consequently the start-ups' valuation. The results indicate that incumbents' bidding behavior is driven by the perceived threat level with respect to the start-up's business activities as well as by the uncertainty with respect to other incumbents' bidding behavior—drivers that are subject to activities by the start-ups' management. Interestingly, the effect even exists if incumbents clearly know that initiating a bidding process will very likely lead to losses.