Acquisition Values and Optimal Financial (In)Flexibility

Acquisition Values and Optimal Financial (In)Flexibility

According to conventional wisdom, the deep pockets of an incumbent serve to deter entry. In large part, the theoretical basis for this view rests upon the model of Bolton and Scharfstein (1990), who show that an unconstrained cashrich incumbent can fund predation in order to increase the likelihood of venture capitalists terminating projects.

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mike

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