Mika Pajarinen

Does patenting increase the probability of being acquired? Evidence from cross-border and domestic acquisitions

A firm that owns a patent has a legal right to exclude. Applying for the patent, however, discloses discovery of an invention by the firm. Both the ownership of the right and the disclosure of the discovery expose the firm to an acquisition, because other firms may be interested in buying the right or the invention for a number of reasons. This idea of patent-driven mergers and acquisitions (M&As) is tested using a large sample of Finnish firms that are mostly private and small. It is found that patenting by a Finnish firm is positively correlated with the probability that the firm is acquired by a foreign firm.

Is the Cost of Debt Capital Higher for Younger Firms

Not much is known about the returns to aging (maturing) in the market for small business finance. Using a large panel of closely held micro firms, we document that the cost of debt capital is higher for young firms. The main finding of this paper is that this negative qualitative relation is also obtained when cross-sectional variation in unobservable creditworthiness of small businesses and within-firm (i.e., inter-temporal) variation in their observable creditworthiness are held constant. We control for the former by firm-specific fixed effects and for the latter by a commercial credit score. We also provide an estimate of the quantitative magnitude of the aging effect, on which both economic theory and earlier empirical research are silent. We find that when a small business ages one year, its cost of debt capital decreases by 12 basis points. The effect is neither negligible nor alarmingly large.

Entrepreneurial Optimism and Survival

This paper uses entrepreneurs´ survival expectations around the time of market entry and subsequent venture exits to study entrepreneurial optimism. Using data on a large number of nascent entrepreneurs in the US and start-ups in Finland, we find that new entrepreneurs´ survival beliefs are on average optimistic but heterogeneous: Some are excessively optimistic, whereas a small subset holds unbiased beliefs. Entrepreneurial optimism is increasing in the relative (interpersonal) optimism and de- creasing in entrepreneurs´ level of education and industry experience in both countries. At least in Finland, those holding optimistic views are more likely to transit into entrepreneurship. JEL: D21, L20 Key words: entrepreneurship, survival, optimism, overestimation

Family Businesses and Globalization in Finland

This paper studies whether family businesses (FBs) differ from non-family businesses (non-FBs) in various dimensions of globalization with a representative sample of businesses in Finnish manufacturing and private services. FBs and non-FBs are not so different when it comes to export and off-shore (includes both in-house moves and outsourcing) probabilities and intensities. After controlling for other relevant factors, however, family businesses are less likely to have employment abroad and their shares of foreign employment are likely to be lower than their non-family counterparts. FBs foreign employment may also be qualitatively different : Compared to non-FBs, FBs seem to be more prone to have employment in the neighboring country rather than in ones geographically more distant. The strategic role of FBs foreign employment also seems to be different, although due to data limitations we are unable to pin down exactly how. FBs are somewhat more likely to increase their overall Finnish employment in the course of the next few years. This overall observation is largely be-cause family businesses are particularly more likely to hire those with somewhat lower levels of formal education, who also initially tend to command a relatively larger share of their employment.