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Title: Going Entrepreneurial? IPOs, Employee Reallocation, and New Firm Creation

Citation Type: Miscellaneous

Publication Year: 2018

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Abstract: Using employee-employer matched US Census data, we examine the effect of a successful initial public offering (IPO) on employee departures to startups. Accounting for the endogeneity of a firm's choice to go public, we find strong evidence that going public induces employees to leave for start-ups. Moreover, we document that the increase in turnover following an IPO is driven by employees departing to start-ups; we find no change in the rate of employee departures for established firms. Following an IPO, many employees who received stock grants experience a positive shock to their wealth. Our results suggest that this change in wealth helps employees better tolerate the risks associated with joining a startup or to fund a startup themselves. Our analysis indicates that the IPO is a catalyst for employee reallocation across firm boundaries.

Url: https://pdfs.semanticscholar.org/9086/592a31053a68b11bee5e01115cba97c7964a.pdf

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Authors: Babina, Tania; Ouimet, Paige; Zaruskie, Rebecca

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Data Collections: IPUMS CPS

Topics: Labor Force and Occupational Structure

Countries: United States