Technical Specialized Knowledge and Secondary Shares in Initial Public Offerings

Authors:
Marc T. Junkunc;Jonathan T. Eckhardt
Affiliations:
School of Business Administration, University of Miami, Coral Gables, Florida 33124;Department of Management and Human Resources, University of Wisconsin, Madison, Wisconsin 53706
Venue:
Management Science
Year:
2009

Citing 8
Cited 0

Entrepreneurial ability, venture investments, and risk sharing

Management Science
Explaining organizational diseconomies of scale in R&D: agency problems and the allocation of engineering talent, ideas, and effort by firm size

Management Science
Network Ties, Reputation, and the Financing of New Ventures

Management Science
Managing Knowledge in Organizations: An Integrative Framework and Review of Emerging Themes

Management Science
Links and Impacts: The Influence of Public Research on Industrial R&D

Management Science
Venture Capitalists and Cooperative Start-up Commercialization Strategy

Management Science
Multistage Selection and the Financing of New Ventures

Management Science
Founding the Future: Path Dependence in the Evolution of Top Management Teams from Founding to IPO

Organization Science

Quantified Score

Hi-index	0.01

Visualization

Abstract

This paper utilizes an understudied but often utilized aspect of initial public offerings (IPOs), secondary shares, to examine whether the knowledge conditions of firms give rise to agency problems that limit the ability of founders and venture capitalists to sell equity at IPO. In an analysis of 2,190 IPOs spanning from 1992 through 2002, we find that private owners are less likely to be observed selling their equity at IPO in ventures that are highly dependent on technical specialized knowledge as measured by the count of individuals with Ph.D.s in the top management team and board of directors. However, we find that this limit on the financial liquidity of founders and venture capitalists is alleviated when the venture's output has received greater market acceptance. Hence, the findings suggest that the financial liquidity of individuals involved in entrepreneurship is likely to be influenced by the knowledge conditions of their venture.