Want to Kill Innovation at Your Company? Go Public.

Many tech entrepreneurs dream of taking their companies public, but they may want to think twice.

While public offerings raise cash, new research suggests that IPOs can also result in stunted innovation at technology firms.

In general, post-IPO companies create inventions that are less ambitious and valuable than do firms that remain private, found Shai Bernstein, an assistant finance professor at the Stanford Graduate School of Business. He analyzed patent data from 1,500 U.S. technology firms that either went public, or intended to go public but called off those plans, between 1985 and 2003. In all, he examined nearly 40,000 patents awarded to the companies both before and after their intended IPO date. The two groups were similar in size, age and research spending.

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