Abstract
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 companies. Our results about non-venture-capital-backed companies that go public, which mostly have been ignored in similar studies, suggest that venture-capital-backing is not an important determinant of post-IPO innovation activity for firms with prior innovation experience. Our findings indicate that venture-capital-backing only helps companies with low pre-IPO innovation activity while companies with high pre-IPO innovation activity continue to innovate after going public whether backed by venture capital or not. We address potential endogeneity issues in a matching framework.
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