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Does Going Public Affect Innovation?

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  • Bernstein, Shai

    (Stanford University)

Abstract

This paper investigates the effects of going public on innovation by comparing the innovative activity of firms that went public with firms that withdrew their IPO filing and remained private. NASDAQ fluctuations during the book-building phase are used as an instrument for IPO completion. Using patent-based metrics, I find that the quality of internal innovation declines following the IPO and firms experience both an exodus of skilled inventors and a decline in productivity of remaining inventors. However, public firms attract new human capital and acquire external innovations. The analysis reveals that going public changes firms' strategies in pursuing innovation.

Suggested Citation

  • Bernstein, Shai, 2014. "Does Going Public Affect Innovation?," Research Papers 3011, Stanford University, Graduate School of Business.
    • Handle: RePEc:ecl:stabus:3011
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    File URL: http://www.gsb.stanford.edu/faculty-research/working-papers/does-going-public-affect-innovation-0
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    Cited by:

    1. Ramana Nanda & William R. Kerr, 2015. "Financing Innovation," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 445-462, December.
    2. Balsmeier, Benjamin & Fleming, Lee & Manso, Gustavo, 2017. "Independent boards and innovation," Journal of Financial Economics, Elsevier, vol. 123(3), pages 536-557.
    3. Sujuan Xie & Yujiang Chen & Yunguo Liu, 2021. "Internal governance and innovation," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2507-2538, April.
    4. Ramana Nanda & William R. Kerr, 2015. "Financing Innovation," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 445-462, December.
    5. Benjamin Balsmeier & Mohamad Assaf & Tyler Chesebro & Gabe Fierro & Kevin Johnson & Scott Johnson & Guan‐Cheng Li & Sonja Lück & Doug O'Reagan & Bill Yeh & Guangzheng Zang & Lee Fleming, 2018. "Machine learning and natural language processing on the patent corpus: Data, tools, and new measures," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(3), pages 535-553, September.
    6. Antonio Falato & David Scharfstein, 2016. "The Stock Market and Bank Risk-Taking," NBER Working Papers 22689, National Bureau of Economic Research, Inc.
    7. repec:zbw:bofrdp:urn:nbn:fi:bof-201512141480 is not listed on IDEAS
    8. repec:zbw:bofrdp:2015_028 is not listed on IDEAS
    9. repec:bof:bofrdp:urn:nbn:fi:bof-201512141480 is not listed on IDEAS

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