Managing entrepreneurial growth: timing the IPO

Chintakananda, Asda

Managing entrepreneurial growth: timing the IPO Public Deposited

Analytics

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March 21, 2019

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Chintakananda, Asda
- Affiliation: Kenan-Flagler Business School

Abstract

This dissertation examines how young private firms manage their entrepreneurial growth through the timing of their initial public offering (IPO). While previous research on IPOs has predominantly assumed that the process of “going public” should be timed to maximize financial benefits, anecdotal evidence has shown that the timing of IPOs also has competitive implications for firms’ strategic growth. Specifically, this study examines whether firms determine the timing of their IPO launch in accordance with what the theory of entrepreneurial action or real options reasoning would suggest, and how strategic considerations such as competition in both the product market and stock market influences such timing decisions. Integrating the theory of entrepreneurial action and real options reasoning, competing hypothesis are developed in which strategic considerations such as product market and stock market uncertainty will induce firms to either accelerate or defer the timing of their IPO launch depending on the influence of the venture capitalists. The timing of the IPO launch is also influenced by the level of competition in the product and stock market, as well as the irreversibility of the IPO decision. The analyses showed clear support for the direct relationship between uncertainty and the timing of IPO: when faced with uncertainty in the product market, firms act in accordance with what the theory of entrepreneurial action would suggest, however, when faced with uncertainty in the stock market, firms act in accordance with what the theory of real options reasoning would suggest. Compared with firms with lower levels of involvement from venture capitalists, firms with higher levels of involvement of venture capitalists are likely to have an early IPO timing. The analysis also supported the assumption that the timing of IPO is also influenced by the existence of competition in the product market and stock market.

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