R&D, internationalization and growth of newly listed firms: European evidence

The initial public offering (IPO) is an important stage in the life cycle of privately held and entrepreneurial firms. For innovative firms eager to capitalize on their technological advances, an IPO represents a springboard for a rapid international expansion of sales. However, there is little research on the longer-term, post-IPO strategic evolution of newly listed companies, including their internationalization. We build on international entrepreneurship and dynamic capabilities perspectives and examine interrelationships between R&D, exporting and growth of newly listed firms in the UK, Germany, Italy and France. Using panel data for 1110 IPOs during the period 1985–2004, we found that R&D intensity is an important antecedent factor for internationalization of sales. Both R&D and export intensities have a positive effect on the sales growth of newly listed firms. However, R&D intensity is path dependent, and is determined by levels of accumulated intangible assets and debt. In terms of time dynamics, the growth of IPO firms is at its highest level just after the float, whereas export intensity increases as IPO firms mature. We conclude that managers and IPO investors need to take into account not only growth opportunities but also past innovation strategies and financial constraints on managers' strategic choices.