Lifecycle theories of mergers and diversification predict that firms make acquisitions and diversify when their internal growth opportunities become exhausted. Free cash flow theories make similar predictions. In contrast to these theories, we find that the acquisition rate of firms (defined as...

Lifecycle theories of mergers and diversification predict that firms make acquisitions and diversify when their internal growth opportunities become exhausted. Free cash flow theories make similar predictions. In contrast to these theories, we find that the acquisition rate of firms (defined as...

Theories of corporate finance predict that young firms make acquisitions to exploit growth opportunities, while mature firms do so because they lack growth opportunities. Further, mature firms are more likely to make wealth-destroying diversifying acquisitions because of agency problems....

This research explores evidence of corporate capabilities for conducting acquisition and alliance deals in young firms. We hypothesize that investors conjecture about the future based on information about a firm's capabilities. Each successive deal carries intrinsic value, creates experience,...