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  • February 2003
  • Article
  • Strategic Management Journal

Which Ties Matter When? The Contingent Effects of Interorganizational Partnerships on IPO Success

By: Ranjay Gulati and M. Higgins
  • Format:Print
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Abstract

This paper investigates the contingent value of interorganizational relationships at the time of a young firm's initial public offering (IPO). We compare the signaling value to young firms of having ties with two types of interorganizational partnerships: endorsement relationships such as those with venture capital firms and investment banks, and strategic alliance partnerships. We propose that, under different equity market conditions, potential investors in an issuing firm attend to different types of uncertainty; attention to these different types of uncertainty affects investors' perceptions of the relative value of a young firm's different kinds of endorsements and partnerships and, hence, IPO success. Results from a sample of young biotechnology firms show that ties to prominent venture capital firms are particularly beneficial to IPO success during cold markets, while ties to prominent investment banks are particularly beneficial to IPO success during hot markets; a firm's strategic alliances with major pharmaceutical/health care firms did not have such contingent effects. Implications for understanding the contingent value of interorganizational ties are discussed.

Keywords

Interorganizatonal Relationships; Networks; Venture Capital; Initial Public Offering; Entrepreneurship; Biotechnology Industry

Citation

Gulati, Ranjay, and M. Higgins. "Which Ties Matter When? The Contingent Effects of Interorganizational Partnerships on IPO Success." Strategic Management Journal 24, no. 2 (February 2003): 127–144.
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About The Author

Ranjay Gulati

Organizational Behavior
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  • Outcome and Process Frames: Strategic Renewal and Capability Reprioritization at the Federal Bureau of Investigation By: Ryan Raffaelli, Tiona Zuzul, Ranjay Gulati and Jan Rivkin
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  • Sona Comstar and Blackstone: Unlocking Value Through Business Transformation By: Ranjay Gulati and Kanika Jain
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