Do IPO costs affect innovation?. Issue 4 (18th November 2020)

• Record Type: Journal Article
• Authors: Cox, Justin; Fuller, Kathleen P.; Lin, Zhilu; Wu, Wentao
• Is Part Of: Review of financial economics. Volume 39:Issue 4(2021)
• Page Start: 385
• Page End: 401
• Publication Date: 2020-11-18
• Subjects: financial constraint -- innovation -- IPO costs -- patents; Business -- Periodicals; Economics -- Periodicals; Business; Economics; Electronic journals; Periodicals; 332.05
• DOI: 10.1002/rfe.1124
• Languages: English
• ISSNs: 1058-3300

Abstract

Abstract: Given the importance of accessing capital to a firm's future, we analyze whether the initial public offering (IPO) costs impact the firm's future innovation. Using the firm's patents and patent citations as our measures of innovation, results indicate that firms with higher IPO costs experience lower initial post‐IPO firm innovation. We also document that the relation between IPO costs and initial post‐IPO firm innovation is stronger in financially constrained firms. Results hold across multiple measures of IPO costs as well as controlling for the level of pre‐IPO innovation activity. We conclude that IPO costs are an important determinant of short‐term post‐IPO firm innovation.