Social Capital of Young Technology Firms and Their IPO Values: The Complementary Role of Relevant Absorptive Capacity

Journal of Marketing, Forthcoming

50 Pages Posted: 8 Jun 2011

See all articles by Guiyang Xiong

Guiyang Xiong

University of Georgia

Sundar G. Bharadwaj

University of Georgia--Terry School of Business; University of Georgia - C. Herman and Mary Virginia Terry College of Business

Date Written: May 23, 2011

Abstract

The strategic importance of Business-to-Business (B2B) relationships is well recognized, but their financial impact remains equivocal. This study links social capital from three types of B2B networks of young technology firms with their Initial Public Offering (IPO) value. The authors identify three relevant types of absorptive capacity that facilitate the transformation of B2B social capital into IPO value. For the transformation to occur, the authors find that young firms need not only the opportunity to access the resources provided by B2B relationships, but also the ability to leverage them through the complementary capability, namely, absorptive capacity. The hypotheses are tested on a sample of 177 IPOs and the results are robust to endogeneity concerns and alternative measures. As one of the first studies in marketing-finance interface to focus on young firms, the findings provide novel insights such as the deleterious financial consequence of having marketing and R&D B2B relationships without the relevant absorptive capacity. Managerial implications regarding communicating the value of absorptive capacity, disclosure of marketing related information, and the importance of marketing for young technology firms are also provided.

Keywords: B2B relationships, social capital, absorptive capacity, stochastic frontier estimation, IPO value, Marketing-Finance interface

Suggested Citation

Xiong, Guiyang and Bharadwaj, Sundar G., Social Capital of Young Technology Firms and Their IPO Values: The Complementary Role of Relevant Absorptive Capacity (May 23, 2011). Journal of Marketing, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1850834

Guiyang Xiong (Contact Author)

University of Georgia ( email )

Department of Marketing and Distribution
148 Brooks Hall, Terry College of Business
Athens, GA Athens 30602-6254
United States

Sundar G. Bharadwaj

University of Georgia--Terry School of Business ( email )

105 Brooks Hall
Athens, GA 30602
United States

University of Georgia - C. Herman and Mary Virginia Terry College of Business ( email )

Brooks Hall
Athens, GA 30602-6254
United States

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