鏂囩尞鍑哄锛?/p>
Narayanan.,
The Path-to-profitability
of
Internet
IPO
firms[J].
Journal
of
Business
Venturing, 2015, 23(2): 165-194.
鍘熸枃
The path-to-profitability of Internet IPO firms
Narayanan;
1. Introduction
The
past
few
decades
have
witnessed
the
formation
and
development
of
several
vitally
important
technologically
oriented
emerging
industries
such
as
disk
drive,
biotechnology,
and
most recently the Internet industry. Entrepreneurial firms in such knowledge intensive industries
are
increasingly
going
public
earlier
in
their
life
cycle
while
there
is
still
a
great
deal
of
uncertainty and information asymmetry regarding their future prospects (Janey and Folta, 2006). A
natural consequence of the rapid transition from founding stage firms to public
corporations
is
an
increasing
tendency
for
firms
to
go
public
on
the
basis
of
a
promise
of
profitability
rather
than
actual
profitability.3
Although
sustained
profitability
is
no
longer
a
requirement
for
firms
in
order
to
go
public,
actual
accomplishment
of
post-IPO
profitability
represents
an
important
milestone
in
the
firm's
evolution
since
it
reduces
uncertainty
regarding
the
long-term
economic
viability
of
the
firm.
In
this
paper,
we
focus
on
identifying
observable
factors
at
the
time
of
going
public
that
have
the
ability
to influence the likelihood and timing of attaining post-IPO profitability by Internet firms.
We
restrict
our
study
to
the
Internet
industry
since
it
represents
a
natural
setting
to
study
the
long-term economic
viability of an emerging industry
where firms tend to go public when they
are
predominantly
unprofitable
and
where
there
is
considerably
uncertainty
and
information asymmetry regarding their future prospects.
The attainment of post-IPO profitability assumes significance since the IPO event does not
provide
the
same
level
of
legitimizing
differentiation
that
it
did
in
the
past
as
sustained
profitability
is
no
longer
a
prerequisite
to
go
public
particularly
in
periods
where
the
market
is
favorably
inclined
towards
investments
rather
than
demonstration
of
profitability
(Stuartet
al.,
1999; Janey and Folta, 2006). During the Internet boom, investors readily accepted the mantra of
鈥済rowth at all costs鈥?nbsp;and enthusiastically bid up the post
-IPO offering prices to irrational levels
(Lange
et
al.,
2001).
In
fact,
investor
focus
on
the
promise
of
growth
rather
than
profitability