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Does an IPO Kill Innovation at Startups?

The high-profile IPOs of startups like Facebook, LinkedIn and Groupon have made going public the new rite of passage for buzzed-about brands. But does an IPO kill innovation at startups?

The high-profile IPOs of startups like Facebook, LinkedIn and Groupon have made going public the new rite of passage for buzzed-about brands. But does an IPO kill innovation at startups?

According to Shai Bernstein of the Stanford Graduate School of Business, yes, it does. Bernstein delved deep into thousands of startups between 1985 and 2003, discovering that going public actually leads to a dearth of creative staff and ideas. What’s more, patents that startups acquire post-IPO were more innovative and of a higher quality than the patents the startup created in-house.

Leadership before and after an IPO is also significant. Organizations that are able to retain the same CEO and chairman of the board after filing for an IPO — Fast Company cites Mark Zuckerberg and Steve Jobs as examples — tend to be more innovative than companies that find new chief executives after going public.

Do you agree that IPOs kill startups’ innovation?

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(Photo credit: Andre-Pierre/Flickr)

Marissa Brassfield
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