Public entrants, public equity finance and creative destruction
AbstractWe explore the importance of new public firms and public equity finance for R&D and creative destruction in the US high-tech sector. Over 1900 new public firms enter high-tech manufacturing between 1970 and 2004; they are increasingly R&D intensive and rely extensively on public equity finance in the 1980s and 1990s. We estimate dynamic R&D models and find a strong link between public equity finance and R&D for new entrants, but not established entrants or incumbents. Further, recent cohorts of public entrants have a substantial economic impact: by 2000, recent public entrants account for almost half of high-tech sales and more than half of R&D. Variation in the availability of public equity finance has a marked impact on entrant R&D and the rate at which entrants take market share from incumbents. Our findings identify a key channel through which public equity markets facilitate the process of creative destruction.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 34 (2010)
Issue (Month): 5 (May)
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Web page: http://www.elsevier.com/locate/jbf
IPO Stock markets Finance and growth Creative destruction Innovation R&D;
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