Is Public Ownership Bad for Professional Service Firms? Ad Agency Ownership, Performance, and Creativity

Abstract

Does public ownership have negative consequences for professional service firms by reducing employee incentives? I address this question with a panel of advertising agencies. Public ownership was associated with inferior performance for small agencies but not for large agencies; and there was no association between ownership and agency creativity, indicating that public ownership did not preclude agencies from competing with strategies requiring highly-skilled professionals. The results challenge existing theories of the ownership models of professional service firms.

Keywords: professional services, ownership, public ownership, going public, creativity, advertising

JEL Classification: D21, L84, G32, L22, M21