A Comparison of Revenue Growth at Recent-IPO and Established Firms: The Influence of SG&A, R&D and COGS

Journal of Business Venturing, Forthcoming

POMS 20th Annual Conference, May 2009

CORS-INFORMS 2009 Joint International Meeting

Posted: 30 Jul 2009 Last revised: 1 Jul 2014

See all articles by Moren Levesque

Moren Levesque

University of Waterloo

Nitin Joglekar

Boston University - Questrom School of Business

Jane Davies

Boston University - Questrom School of Business

Date Written: July 28, 2009

Abstract

A dynamic view of the resource based theory (RBT) examines how a firm builds its resources over time, considering variations in resources’ growth rates while the firm attempts to grow. Accordingly, we consider the elasticity of accumulated resources to assess conditions where these resources might serve as substitutes for rather than complements to COGS during periods of growth. We specify a production function that links aggregate resource allocation among SG&A, R&D and COGS expenses to a firm’s revenue. This function yields a set of hypotheses on the elasticity of SG&A and R&D, and the productivity of COGS, while controlling for the revenue growth rate. We test these hypotheses on a dataset of 64 randomly selected firms that recently underwent an IPO, and a comparable set of 64 established public firms from four high-technology sectors. Results show that the accumulated stocks of resources can serve as substitutes for rather than complements to COGS, and the manner in which recent-IPO firms allocate and use resources differs from their established counterparts. We discuss the implications of associated elasticity and productivity results.

Keywords: balanced growth in firm, marketing and R&D investments, established versus post-IPO firms

Suggested Citation

Levesque, Moren and Joglekar, Nitin and Davies, Jane, A Comparison of Revenue Growth at Recent-IPO and Established Firms: The Influence of SG&A, R&D and COGS (July 28, 2009). Journal of Business Venturing, Forthcoming; POMS 20th Annual Conference, May 2009; CORS-INFORMS 2009 Joint International Meeting. Available at SSRN: https://ssrn.com/abstract=1440722

Moren Levesque

University of Waterloo ( email )

Waterloo, Ontario N2L 3G1
Canada

Nitin Joglekar (Contact Author)

Boston University - Questrom School of Business ( email )

595 Commonwealth Ave
Boston, MA 02466
United States

Jane Davies

Boston University - Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States

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