Going Public When You Can in Biotechnology

37 Pages Posted: 24 May 2002 Last revised: 2 Nov 2012

See all articles by Michael R. Darby

Michael R. Darby

University of California, Los Angeles (UCLA) - Global Economics and Management (GEM) Area; National Bureau of Economic Research (NBER)

Lynne G. Zucker

University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)

Date Written: May 2002

Abstract

Scientist-entrepreneurs prominent in biotech and other high-technology industries view going public not as a cost-effective source of capital but as a cross between selling a now-proven innovation and winning a lottery. Unlike most empirical IPO analyses confined to those firms that go public, we study substantially all the non-public biotech firms founded up through 1989. The probability that one of these firms goes public in any given year increases with the quality of the firm's science base (use of recombinant DNA technology, number of articles by star scientists as or with firm employees, number of biotech patents), the percentage of eligible firms going public the year the firm was founded as a strategy indicator, recent biotech returns as an indicator of a hot market, and whether or how many rounds of venture capital has been obtained. The same key factors increase the expected proceeds raised from IPOs, but the quality of the firm's science base plays a more dominant role. All firms going public try to look like the next Genentech, but only those with the strong science base necessary for success attract large investments.

Suggested Citation

Darby, Michael R. and Zucker, Lynne G., Going Public When You Can in Biotechnology (May 2002). NBER Working Paper No. w8954. Available at SSRN: https://ssrn.com/abstract=313655

Michael R. Darby (Contact Author)

University of California, Los Angeles (UCLA) - Global Economics and Management (GEM) Area ( email )

110 Westwood Plaza
Box 951481
Los Angeles, CA 90095-1481
United States
310-825-4180 (Phone)
310-454-2748 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Lynne G. Zucker

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361 Departments of Sociology and Policy Studies 2201 Hershey mc 155107
Los Angeles, CA 90095-1361
United States
310-825-3227 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
79
Abstract Views
1,735
rank
309,492
PlumX Metrics