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Signaling in science-based IPOs: The combined effect of affiliation with prestigious universities, underwriters, and venture capitalists

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  • Colombo, Massimo G.
  • Meoli, Michele
  • Vismara, Silvio

Abstract

This paper studies the combined effect of affiliation with prestigious universities, underwriters, and venture capitalists on the valuation of biotech ventures at IPO and their post-IPO performance. We argue that affiliation to a prestigious university provides the affiliated firm with a quality signal in the scientific domain. The pure quality signaling effect of the affiliation is isolated from the substantive benefits it provides by performing a difference-in-difference approach based on the scientific reputation of scientists in firms' upper echelons. The signal is stronger the weaker is the scientific reputation of scientists of the focal IPO-firm and is additive to those provided by prestigious venture capitalists and underwriters. Results for a sample of 254 European biotech ventures that went through an IPO between 1990 and 2009 confirm our predictions.

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  • Colombo, Massimo G. & Meoli, Michele & Vismara, Silvio, 2019. "Signaling in science-based IPOs: The combined effect of affiliation with prestigious universities, underwriters, and venture capitalists," Journal of Business Venturing, Elsevier, vol. 34(1), pages 141-177.
    • Handle: RePEc:eee:jbvent:v:34:y:2019:i:1:p:141-177
    DOI: 10.1016/j.jbusvent.2018.04.009
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