Morricone, S., Munari, F., Oriani, R. and de Rassenfosse, G., 2017 "Commercialization strategy and IPO underpricing". Research Policy 46(6), 1133-1141.

Abstract
This paper studies the interplay between two defining features of technology-based firms: licensing as a commercialization strategy and the reliance on equity financing. Within the context of an IPO, we argue that the technology commercialization strategy of a firm going public affects information asymmetries and, therefore, IPO underpricing. In particular, we theorize that underpricing will be higher when a firm's technology commercialization strategy is more based on licenses. We also posit that the size of the patent portfolio will mitigate this effect. Our results from a sample of 130 IPOs in the U.S. semiconductor industry confirm these predictions.

Keywords: Initial public offering (IPO), Underpricing, License, Patent, Semiconductor
JEL classification: G32; L24; L63; M13; O32; O34

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This article:

• Argues that firms' commercialization strategy affects IPO underpricing;
• Predicts that IPO underpricing will be more acute with a licensing-based commercialization strategy as opposed to a product-based commercialization strategy (because of contractual hazards);
• Predicts that the size of the patent portfolio will mitigate the negative effect of a licensing-based strategy on underpricing;
• Tests the theory using an instrumental variable approach on a sample of 130 IPOs in the U.S. semiconductor industry.

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