DP5224 What are Firms? Evolution from Birth to Public Companies

Author(s): Steven Kaplan, Berk A. Sensoy, Per Johan Strömberg
Publication Date: September 2005
Keyword(s): entrepreneurship, theory of the firm, venture capital
JEL(s): D21, D23, G24
Programme Areas: Financial Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=5224

We study how firm characteristics evolve from early business plan, to initial public offering, to public company for 49 venture capital financed companies. The average time elapsed is almost six years. We describe the financial performance, business idea, point(s) of differentiation, non-human capital assets, growth strategy, customers, competitors, alliances, top management, ownership structure, and the board of directors. Our analysis focuses on the nature and stability of those firm attributes. Firm business lines remain remarkably stable from business plan through public company. Within those business lines, non-human capital aspects of the businesses appear more stable than human capital aspects. In the cross-section, firms with more alienable assets have substantially more human capital turnover.