The Great Start-up Sellout and the Rise of Oligopoly

Abstract

We document a secular shift from initial public offerings to acquisitions of venture capital-backed start-ups and show that this trend is accompanied by an increase in the opportunity cost of going public over the last quarter-century. Dominant companies that are disproportionately active in the corporate control market for start-ups have become more insulated from the pressures of product market competition over the same period. These facts are consistent with the hypothesis that start-up acquisitions have contributed to rising oligopoly power.