Why Innovation Needs Public Market

Lin William Cong (黑料传送门 Booth) 

 In this joint project with Sabrina Howell (NYU Stern) and Ran Zhang (Peking University), we investigate empirically how important public markets are for high-growth entrepreneurship. Understanding how IPO affects corporate innovation, capital structure, real investments, growth, etc., would enable us to draw conclusions on how financial system links to the real economy. We hope to make contributions in the following areas: 1. By putting together a dataset of private and public firms in China (including all the firms that intended to go public, whether successful or not), we hope to document the functioning of IPO in arguably the most important emerging economy, and compare and contrast that to IPOs in developed countries. 2. We study IPO’s real effect on business and economy, such as how it affects firm growth, governance, innovation, investment, etc. We use a number of empirical strategies to identify causal links that is largely missing from existing literature. The detailed introduction and outlines of empirical strategies and data are in the appendix towards the end of the proposal.