Don'T Rush To Let Your Company Go Public.

< p > initial public offerings and acquisitions actually detract from the innovative spirit of start-ups, which are often the primary factors to attract investors or new owners.

David Hu, a professor of management at Walton business school, and Vikas Agarwal, a professor of entrepreneurship and family business at the European Institute of business administration, recently wrote a paper entitled "entrepreneurship exit and enterprise innovation".

The article points out that public supervision not only promotes new companies to improve their innovation level, but backfires.

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< p > researchers found that innovation level is the highest among privately held new companies, the lowest among listed companies, while the acquired companies are in the middle zone.

Xu and agawall found that the key to the ranking of innovation achievements is the degree of public supervision rather than the degree of core members leaving the company.

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< p > once a company is listed, it must disclose regularly to the < a href= "http://www.91se91.com/news/index_h.asp" > the US Securities and Exchange Commission < /a >, from quarterly earnings, stocks and bonds to other substantive events, such as the important drug invention of executives leaving or must be subject to regulatory approval.

In addition, after initial public offerings, the company will have more shareholders, often attracting a group of Wall Street analysts.

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The emerging companies listed on P have been stared by many pairs of eyes, which makes them more stressed, especially because the company must report to shareholders every quarter.

Financial results and product innovation will push up share prices, so companies tend to choose quick returns, which is not conducive to long-term innovation.

"The type of project will change," Agarwal said.

"After listing, the ability to carry out risky projects is much weaker, because the company's tolerance for failure has been reduced."

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< p > however, if a new company is always private, because it will not always be under the pressure of short-term results, it will be able to create "extravagance".

This is very critical, because important innovation usually takes time to grow and requires more experimentation.

In the long run, important innovations often generate higher returns than more deterministic investment activities.

"If the company can remain private, it will try more and not have too many fetters," Xu said.

"No one will see if you are successful.

It's easier to do all we can. "

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< p > < strong > patent quotas declined < /strong > < /p >

In the paper, Agarwal and Xu studied the performance of 476 Biotech Corp from 1980 to 2000 and won the a href= "http://www.91se91.com/news/index_s.asp" > venture capital fund < /a >.

The sample includes 15400 patents and nearly 45800 forward reference numbers.

The authors found that after initial public offerings, the quality and quantity of innovation decreased with patent citation and patent application.

"If managers know that project progress must be regularly reported, they may be more motivated to choose projects that are more likely to produce steady progress," the article said.

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P and Agarwal also pointed out that not all companies listed on the same impact on innovation.

Some emerging companies are carrying out several early projects, which are closely watched and scrutinized by analysts.

They found that the negative impact of IPO on innovation was most obvious for such companies.

"This is the time when innovation results are most vulnerable," Xu said.

"At this time, the performance of the company will be much worse than that of the general listed company."

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< p > despite the fact that the famous a companies such as "a href=" http://www.91se91.com/news/index_s.asp "> Apple" /a "(Apple) and" a href= "http://www.91se91.com/pioneer/" /a "(Google) are all listed companies, but Agarwal believes that if these companies remain private, they may be more innovative.

In addition, the innovation level of these companies is better than going public after going public.

"Most of the most innovative companies have done most of their innovation in the private sector," he said.

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< p > Agarwal also pointed out that the leaders of Facebook < a href= "http://zs.sjfzxm.com/" > (Facebook < /a >) are more inclined to not be listed, but because of the provisions of the securities and Exchange Commission of the United States, except for other requirements, once the number of shareholders reaches or exceeds 500, they must submit their reports regularly and therefore have to go to the road of listing.

"Technical reasons forced Facebook to go public," he said.

If you can maintain private ownership, then Facebook is likely to be more innovative.

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< p > Xu pointed out that audio equipment manufacturer Baise (Bose) is an example of innovative privately-held company.

Amar Bose, founder (Amar Bose) died in July at the age of 83.

Before death, Baise refused to raise public offerings and keep the company private.

In an interview with discovery magazine in 2004, he said public listing would destroy everything.

As a professor at Massachusetts Institute of Technology, Baise says he has visited almost six listed companies founded by MIT teachers in Boston.

"The CEO of these companies said," if we know the consequences, we will never go public.

We need to spend three of our time to maintain the image of the company to keep the stock up.

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< p > in the July 12th obituary, < < a href= > http://sjfzxm.com/DESIGN/designer/index.asp > > < < /a > > reported that Baise "persistently focused on acoustic engineering innovation."

His loudspeaker, though expensive, has won the reputation of bringing the quality of the concert hall to the family.

The obituary continued that by rejecting the listing, "without the pressure of quarterly earnings, Dr. Baise can pursue high-risk long-term research, such as noise reduction headphones and an innovative vehicle suspension system."

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< p > < strong > M & a selection < /strong > < /p >

< p > according to the researchers, when it comes to mergers or acquisitions, its impact on emerging companies is mixed. While the quality of innovation is decreasing, the number actually increases.

That is to say, new companies will submit more patent applications, but when they are bought, their patent quotas will be reduced.

Researchers usually cite other patents as the basis for their own tests.

The more patents are cited, the greater the influence.

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< p > why does takeovers stimulate new companies to complete more patents, while quotations have dropped sharply? Xu and Agarwal said this is once again a matter of public supervision.

When a new company becomes a subsidiary or department of a larger company, its managers want to impress the new owners.

One way is to submit more patents.

But at the same time, they tend to choose projects that are faster to show results so as to satisfy new owners.

This means that managers are not willing to subsidize innovation projects because their recovery time is too long.

As a result, the quality of innovation declined, and correspondingly, quotations also declined.

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< p > Xu and Agarwal also found that the composition of the buyers of new companies has an impact on their creativity.

Compared with private acquirers, the purchase quality of listed companies will lead to a decline in the quality of entrepreneurs' innovation, and the reason is the level of public supervision.

In addition, buyers who have less similarity will have more impact on the quality of innovation if there is more technical overlap between buyers and entrepreneurs.

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One of the reasons for P is that if buyers have similar business with newly purchased companies, the trend is to merge the company into existing businesses.

This means that in this company, many people are doing the same thing, and the threat of layoffs will arise.

Xu said, therefore, managers of emerging companies should try to impress new owners to keep their jobs.

One way is to promote short-term results at the expense of long-term innovation.

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< p > < strong > fund raising < /strong > /p >

< p > then what do new companies need for capital? The author writes that entrepreneurs have been willing to abandon their ability to operate privately in exchange for the benefits of liquidity and other public offerings.

As listed companies, they can raise funds for business expansion, research and other capital needs through issuing stocks or debts.

But Xu and Agarwal said there were other ways to raise funds without giving up private ownership.

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For example, a company can acquire by Private Companies, which has less harmful effects on innovation than P.

Once a buyer successfully purchases a new company, it will have to ensure proper incentives and cushioning to completely retain the spirit of innovation.

Xu suggested that the new parent company should try to make the emerging company develop gradually, separate it into an independent unit, or set it up as an independent private unit, or otherwise isolate it from other departments of the company.

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P says that emerging companies can also form business partners with big companies that can help them.

Biotech Corp can form alliances with big competitors, such as Merck and Pfizer, in exchange for R & D grants with the right to sell.

He added: "we find that if you want to maximize your chances of breakthrough work, you must be insulated from external pressure."

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< p > Agarwal said there is another option for emerging companies seeking private investors with private ownership.

When the owners are ready to quit, they can sell their shares to other private investors who can guarantee the quality of innovation.

"Continued private ownership is valuable," he said.

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< p > bottom line is that emerging companies can't rush to market because they get cash or capital financing quickly through capital markets.

Doing so will have a detrimental effect on long-term innovation.

"They have a choice," Agarwal said.

"If they want to build a long-term innovation company, they need to think more carefully about the impact of these actions on innovation."

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