Why Wait? a Century of Life Before IPO

16 Pages Posted: 13 Jan 2001 Last revised: 31 Jan 2021

See all articles by Boyan Jovanovic

Boyan Jovanovic

New York University - Department of Economics

Peter L. Rousseau

Vanderbilt University - Department of Economics

Date Written: January 2001

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.

Suggested Citation

Jovanovic, Boyan and Rousseau, Peter L., Why Wait? a Century of Life Before IPO (January 2001). NBER Working Paper No. w8081, Available at SSRN: https://ssrn.com/abstract=256089

Boyan Jovanovic (Contact Author)

New York University - Department of Economics ( email )

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Peter L. Rousseau

Vanderbilt University - Department of Economics ( email )

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HOME PAGE: http://www.vanderbilt.edu/econ/faculty/rousseau.html

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