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Why Wait? A Century of Life before IPO

Author

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  • Boyan Jovanovic
  • Peter L. Rousseau

Abstract

Firms that entered the stock market in the 1990s were younger than any earlier cohort since World War I. Surprisingly, however, firms that IPO'd at the close of the 19th century were just as young as the companies that are entering today. We argue here that the electrification-era and the IT-era firms came in young because the technologies that they brought in were too productive to be kept out very long. The model assumes that the stage before IPO is a learning period during which the firm refines the idea before committing to it at the IPO stage. The better the idea, the higher is the opportunity cost of a delay in its implementation, and the earlier the firm will have its IPO.
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Suggested Citation

  • Boyan Jovanovic & Peter L. Rousseau, 2001. "Why Wait? A Century of Life before IPO," American Economic Review, American Economic Association, vol. 91(2), pages 336-341, May.
    • Handle: RePEc:aea:aecrev:v:91:y:2001:i:2:p:336-341
    Note: DOI: 10.1257/aer.91.2.336
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    References listed on IDEAS

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    1. Jovanovic, Boyan & Nyarko, Yaw, 1996. "Learning by Doing and the Choice of Technology," Econometrica, Econometric Society, vol. 64(6), pages 1299-1310, November.
    2. John W. Kendrick, 1961. "Productivity Trends in the United States," NBER Books, National Bureau of Economic Research, Inc, number kend61-1.
    3. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-461, June.
    4. W. Braddock Hickman, 1952. "Trends and Cycles in Corporate Bond Financing," NBER Books, National Bureau of Economic Research, Inc, number hick52-1.
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    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-

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