This study addresses the signaling power of corporate innovation indicators in the IPO market. Innovation measures can convey considerably different signals to public investors, depending on whether they quantify the firm’s commitment in innovative inputs, as in the case of R&D investments, or achieved outputs, as in the case of patents. This study aims at disentangling such effects. Using a sample of 382 high-tech entrepreneurial firms going public in Europe during 1998–2003, this paper studies the impact of a firm’s R&D intensity and number of patents on stock liquidity. Results reveal that IPO firms with larger R&D investments benefit from greater liquidity in the aftermarket, while the size of the patent portfolio does not exert any significant effect. This suggests that investors tend to participate more in IPOs by firms embedding greater innovation potential, as suggested by their level of R&D investments, while the number of patents does not drive their behavior.
Signori, A., Signaling Through Innovation in IPOs, in Audretsch, D., Lehmann, E., Meoli, M., Vismara, S. (ed.), University Evolution, Entrepreneurial Activity and Regional Competitiveness, Springer, Heidelberg 2015: <<International Studies in Entrepreneurship>>, 32 427- 439. 10.1007/978-3-319-17713-7_21 [http://hdl.handle.net/10807/69033]
Signaling Through Innovation in IPOs
Signori, Andrea
2015
Abstract
This study addresses the signaling power of corporate innovation indicators in the IPO market. Innovation measures can convey considerably different signals to public investors, depending on whether they quantify the firm’s commitment in innovative inputs, as in the case of R&D investments, or achieved outputs, as in the case of patents. This study aims at disentangling such effects. Using a sample of 382 high-tech entrepreneurial firms going public in Europe during 1998–2003, this paper studies the impact of a firm’s R&D intensity and number of patents on stock liquidity. Results reveal that IPO firms with larger R&D investments benefit from greater liquidity in the aftermarket, while the size of the patent portfolio does not exert any significant effect. This suggests that investors tend to participate more in IPOs by firms embedding greater innovation potential, as suggested by their level of R&D investments, while the number of patents does not drive their behavior.
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