What is the role of public feeder markets in developing technology-based small firms? An exploration of the motivations for listing on AIM since the GFC

Abstract

In the aftermath of the 2007 global financial crisis, stock markets experienced a sharp decline in listings and a marked reduction in initial public offerings (IPOs). This paper explores the factors determining UK technology-based small firm (TBSF) listings on the UK alternative investment market (AIM) and whether this market has a role to play in their future development. A case-study approach is used to contrast the experiences of five recent AIM-listed TBSFs with five TBSFs approaching private equity investment exit, i.e. considering an IPO exit. The paper concludes that macro market conditions, rather than managerial resource-based or AIM market structural factors, were most influential in TBSF pecking-order preferences to undertake IPOs. From a managerial resource-based perspective, lifelong entrepreneurs were more likely than serial entrepreneurs to favour an IPO exit, as it supported their aims to continue to manage and grow UK-based companies. In addition, with a more buoyant and sustainable AIM market, TBSF investors are more likely to choose IPOs. To conclude, AIM played an important role in the development of listed UK TBSFs. A more buoyant AIM could ease the UK finance escalator's flow, facilitating more rapid UK TBSF growth.