Choosing The Right Partners: The Perspective of the External Investors in the IPO Market

Abstract

This study aims to understand the external investors’ trade-offs between their expectations for newly public firms of novel innovation and their concerns of potential losses caused by information asymmetry, and how their trade-off decisions vary as their perception of newly public firms' value generated by their alliances portfolios changes. This study uses 128 newly public firms in the high-tech industries in the United States as a sample. The results highlights that the information asymmetry between corporate insiders and external investors in the IPO market affects investors' perceived value of younger ventures' organizational learning and their alliance strategies, which in turn affects the fundraising of IPOs. By doing so, this research contributes to the organizational leaning theory by including information asymmetry theory into consideration and extends the understanding of the relationships between alliance strategies and organizational learning of firms by incorporating the viewpoint of external investors.