From Forbes:
Technology companies that go public demonstrate a sharp drop-off in innovation after they come public compared to similar firms that stay private, according to a new study by Shai Bernstein, assistant professor of finance at the Stanford Graduate School of Business.
The study finds that public companies, newly fortified with additional capital, continue to innovate, as measured by the number of patents filed. But Bernstein finds that the rate at which those patents are cited falls markedly after going public. In short, the inventors at public companies tend to produce more incremental work, rather than breakthrough ideas.
“I find a signinficant link between public ownership and innovation: going public causes a substantial decline of approximately 40 percent in innovation novelty as measured by patent citations,” he writes in the paper. “At the same time, I find no change in the scale of innovation, as measured by the number of patents. These results suggest that the transition to public equity markets leads firms to reposition their R&D investments toward more conventional projects.”...MORE
