Journal Article
The authors examine how IPOs and acquisitions affect entrepreneurial innovation as measured by patent counts
and forward patent citations.
The authors construct a firm-year panel dataset of all venture capital-backed
biotechnology firms founded between 1980-2000, tracked yearly through 2006. The authors address the
possibility of unobserved self-selection into exit mode by using coarsened exact matching (CEM), and in
two additional ways: (1) comparing firms that filed for an IPO (or announced a merger) with those not
completing the transaction for reasons unrelated to innovation, and (2) using an instrumental variables
approach.
The authors find that innovation quality is highest under private ownership and lowest under public
ownership, with acquisition intermediate between the two. Together with a set of within-exit mode
analyses, these results are consistent with the proposition that information confidentiality mechanisms
shape innovation outcomes.
The results are not explained by inventor-level turnover following exit events
or by firms’ pre-exit window dressing behavior.
Faculty
Associate Professor of Entrepreneurship and Family Enterprise