What are Firms? Evolution from Early Business Plans to Public Companies

53 Pages Posted: 14 Apr 2006  

Steven N. Kaplan

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Berk A. Sensoy

Ohio State University - Fisher College of Business

Per Strömberg

Swedish House of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: October 2006

Abstract

We study how firm characteristics evolve from early business plan to initial public offering (IPO) to public company for 50 venture capital (VC) financed companies. We describe the financial performance, line of business, point(s) of differentiation, non-human capital assets, growth strategy, top management, and ownership structure. The most striking finding is that firm business lines or ideas remain remarkably stable from business plan through public company. Within those business lines, non-human capital aspects of the businesses are more stable than human capital aspects. In the cross-section, firms with more alienable assets experience more managerial turnover suggesting that specific people becomes less critical as firms establish non-human assets. We obtain qualitatively similar results to those in our primary sample for all non-financial start-up IPOs in 2004 - both VC- and non-VC backed. This suggests that our main results are not specific to the presence of a VC or to the time period. We discuss how our results relate to theories of the firm and to VC investment decisions.

Keywords: Entrepreneurship, Venture Capital, Theory of the firm

JEL Classification: M13, G24, D23, L20

Suggested Citation

Kaplan, Steven N. and Sensoy, Berk A. and Strömberg, Per, What are Firms? Evolution from Early Business Plans to Public Companies (October 2006). Available at SSRN: https://ssrn.com/abstract=890168 or http://dx.doi.org/10.2139/ssrn.890168

Steven Neil Kaplan

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-4513 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Berk A. Sensoy

Ohio State University - Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

Per Stromberg (Contact Author)

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

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