Price Effect of Innovation Capital in IPO Market: The Moderating Effects of Strategic Positioning and Strategic Competition
Date Issued
2008
Date
2008
Author(s)
Hwang, Chiung-Yi
Abstract
Innovation capital including R&D intensity and patent stocks has assumed a key source of competitive advantages and can create firm long-term growth. However, some researches indicate, innovation capital is associated with increased underpricing in initial public offerings (IPOs). This study based on two different perspectives- resource-based theory and information asymmetry theory to investigate (1) the relationship between innovation capital and the underpricing of IPOs. (2) the role which strategic positioning plays in the IPO market and (3) how strategic competition influences a firm’s IPO price. This study is based on a review of 117 U.S. manufacturing firms that issued IPOs from 1986 to 2006. The information was gathered from SDC、CRSP and USPTO databases. The result of this study shows that the relationship between innovation capital and underpricing in IPO is mixed. However, strategic positioning can mitigate the relation-ship between R&D intensity and underpricing. It means firms introducing more break-through innovations to be market leaders can avoid their IPO prices being underpriced although their R&D intensity is high. Besides, strategic competition makes the rela-tionship between patent stocks and underpricing worsen. Having many patents does not ensure firms’ earnings and the actual value of a firm’s in innovation is relative to other firms’ reaction in innovation.
Subjects
initial public offering, innovation capital, strategic positioning, strategic competition, information asymmetry, resource based view
Type
thesis
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