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Does Going Public Affect Innovation?

55 Pages Posted: 18 Dec 2012 Last revised: 6 Aug 2014

Shai Bernstein

Stanford Graduate School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: August 1, 2014


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.

Keywords: going public, innovation

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

Suggested Citation

Bernstein, Shai, Does Going Public Affect Innovation? (August 1, 2014). Journal of Finance, Forthcoming. Available at SSRN: or

Shai Bernstein (Contact Author)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

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