Commercialization Strategy and IPO Underpricing
Serena Morricone, Federico Munari, Raffaele Oriani, Gaétan de Rassenfosse
Research Policy (2017), 46(6): 1133-1141
Research Question
Does a firm's technology commercialization strategy impact IPO underpricing?
Why Do We Care
Understanding the relationship between commercialization strategies, specifically licensing, and IPO underpricing is crucial for investors and firms alike. Technology-based firms often face significant information asymmetries when going public, leading to potential underpricing of their shares. By analyzing how different strategies affect these dynamics, firms can better strategize their IPOs to minimize financial losses and optimize their capital-raising efforts.
What Did We Do
We analyzed a sample of 130 U.S. semiconductor firms that went public between 1996 and 2007 to study the relationship between commercialization strategies and IPO underpricing. Utilizing secondary data from multiple sources, including the Securities Data Corporation and USPTO patent records, we employed two-stage least squares regressions to account for potential endogeneity in our model.
What Did We Find
Our findings indicate that increasing revenues from licensing-based strategies significantly heighten IPO underpricing, with the coefficient for licensing-based revenues showing significance at the one percent level. Additionally, a firm's patent stock negatively moderates this effect, suggesting that each standard deviation increase in patent stock reduces IPO underpricing by approximately 8 percentage points. Overall, the average IPO underpricing for our sample was 18%, aligning with prior findings in the literature.
Primary Data
- Sample of 130 firms from the U.S. semiconductor industry that went public between 1996 and 2007
- Data sourced from Securities Data Corporation (SDC) and USPTO patent records
- Utilized IPO prospectuses for financial and commercialization strategy details
Assumptions
- Endogeneity concerns addressed with instrumental variables related to the semiconductor market
- Presumed that licensing strategy impacts IPO underpricing due to associated uncertainty
- Assumed that patent stock serves as a quality signal for investors in the context of licensing-based strategies