IPO'S VS INNOVATION

Innovative firms that go public tend to experience reduced innovation, a departure of skilled inventors and lower productivity for those who remain. (click below to read more)


Those are among the grim findings of a study of 1,800 patent-generating firms. It found a 40% drop in "innovation novelty" at such firms, as measured by patent citations, compared with firms that made initial-public-offering filings but withdrew them due to stock-market conditions.

Post-IPO firms continued to churn out patentable inventions, suggesting "that the transition to public equity markets leads firms to reposition their [research-and-development] investments toward more conventional projects," the author writes.

The findings are consistent with research showing that the performance of firms tends to decline after an IPO. Yet the prospect of going public remains an important force in stimulating innovation, the author reports.

"Does Going Public Affect Innovation?" Shai Bernstein, Stanford Graduate School of Business Research Paper No. 2126 (December)