Abstract
Abstract This article takes a broader perspective that encompasses both traditional agency-based explanations of buy-outs as well as recognizing the buy-out phenomenon as a vehicle for entrepreneurial innovation. Although early studies suggested that buy-outs involved both agency cost reduction and entrepreneurial aspects, they did not formally conceptualize these two approaches. The agency theory approach conceptualizes buy-outs as a tool that facilitates cost efficiencies. The entrepreneurial perspective sees buy-outs as a means for implementing new innovations and strategic change that enable fuller exploitation of firm resources that may have been blocked by prior ownership arrangements, such as being part of a large diversified firm or a privately-owned firm with leadership succession problems. The article first elaborates the definitions and sources of buy-outs. Secondly, it reviews theoretical perspectives relating to buy-outs, notably the agency approach and an entrepreneurial perspective which draws on the theory of entrepreneurial cognition. The third main section reviews a model to explain different types of buy-out drawing on these two perspectives. The fourth section reviews studies of the effects of buy-outs, identifying evidence consistent with agency and entrepreneurial views of buy-outs. The final section provides discussion and conclusions.
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