The Effect of Venture Capital on Innovation in Newly Public Firms

46 Pages Posted: 10 Sep 2021

See all articles by Serdar Aldatmaz

Serdar Aldatmaz

George Mason University - Department of Finance

Ugur Celikyurt

Koc University - College of Administrative Sciences and Economics

Date Written: August 2021

Abstract

We study innovation in newly public firms and find that VC-backing negatively impacts patent production and citations within the initial years of an IPO. Finding this effect to be more pronounced at firms with higher innovation activity pre-IPO, we conclude that this adverse impact is a consequence of VCs timing the IPOs of their portfolio companies in such a way that patents reach a high right before the IPO followed by a natural decline post-IPO. Additionally, VC-backing leads to higher growth in sales and productivity after going public pointing to a shift in VC focus post-IPO. We address endogeneity concerns with an instrumental variables approach.

Keywords: Venture Capital, Initial Public Offerings, Innovation, Patents

JEL Classification: G24, G30

Suggested Citation

Aldatmaz, Serdar and Celikyurt, Ugur, The Effect of Venture Capital on Innovation in Newly Public Firms (August 2021). Available at SSRN: https://ssrn.com/abstract=3919090 or http://dx.doi.org/10.2139/ssrn.3919090

Serdar Aldatmaz (Contact Author)

George Mason University - Department of Finance ( email )

Fairfax, VA 22030
United States

Ugur Celikyurt

Koc University - College of Administrative Sciences and Economics ( email )

Rumelifeneri Yolu
Sariyer 80910, Istanbul
Turkey

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
140
Abstract Views
558
Rank
381,096
PlumX Metrics