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Does Going Public Affect Innovation?

Shai Bernstein

Stanford Graduate School of Business

August 1, 2014

Journal of Finance, Forthcoming

This paper investigates the effects of going public on innovation by comparing the innovative activity of firms that went public with firms that withdrew their IPO filing and remained private. NASDAQ fluctuations during the book-building phase are used as an instrument for IPO completion. Using patent-based metrics, I find that the quality of internal innovation declines following the IPO and firms experience both an exodus of skilled inventors and a decline in productivity of remaining inventors. However, public firms attract new human capital and acquire external innovations. The analysis reveals that going public changes firms' strategies in pursuing innovation.

Number of Pages in PDF File: 55

Keywords: going public, innovation

JEL Classification: G32; G34; L25; L26; O31; O32

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Date posted: December 18, 2012 ; Last revised: August 6, 2014

Suggested Citation

Bernstein, Shai, Does Going Public Affect Innovation? (August 1, 2014). Journal of Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2190566 or http://dx.doi.org/10.2139/ssrn.2190566

Contact Information

Shai Bernstein (Contact Author)
Stanford Graduate School of Business ( email )
655 Knight Way
Stanford, CA 94305-5015
United States
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