Public entrants, public equity finance and creative destruction

Date
2010-01-01
Authors
Brown, James
Petersen, Bruce
Journal Title
Journal ISSN
Volume Title
Publisher
Altmetrics
Authors
Research Projects
Organizational Units
Finance
Organizational Unit
Journal Issue
Series
Abstract

We explore the importance of new public firms and public equity finance for R&D and creative destruction in the U.S. high-tech sector. Over 1900 new public firms enter high-tech manufacturing between 1970 and 2004; they are increasingly R&D intensive and rely extensively on public equity finance in the 1980s and 1990s. We estimate dynamic R&D models and find a strong link between public equity finance and R&D for new entrants, but not established entrants or incumbents. Further, recent cohorts of public entrants have a substantial economic impact: by 2000, recent public entrants account for almost half of high-tech sales and more than half of R&D. Variation in the availability of public equity finance has a marked impact on entrant R&D and the rate at which entrants take market share from incumbents. Our findings identify a key channel through which public equity markets facilitate the process of creative destruction.

Description

This is an accepted manuscript from an article from Journal of Banking & Finance, 2010, 34(5); 1077-1088. DOI: 10.1016/j.jbankfin.2009.11.005. Posted with permission.

Keywords
IPO, Stock markets, Finance and growth, Creative destruction, Innovation, R&D
Citation
DOI
Collections