Does Going Public Affect Innovation?
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
Date posted: December 18, 2012 ; Last revised: August 6, 2014