Persistence of Innovation Around Initial Public Offerings : Evidence from NonVC-Backed IPOs

We study the innovation activity of firms going public and find that post-IPO innovation activity is highly associated with pre-IPO innovation activity at both venture-capital- and non-venture-capital-backed firms. This persistence in innovation suggests that firms' pre-IPO innovation experience might influence the effect of venture-capital-backing on post-IPO innovation. Indeed, we find that venture-capital-backing helps companies with low pre-IPO innovation activity to produce more innovation output post-IPO, while it is negatively associated with post-IPO innovation at companies with some pre-IPO innovation experience, which we try to explain with an IPO timing argument. We attempt to address potential endogeneity issues in a matching framework