Does Public Ownership and Accountability Increase Diversity? Evidence from IPOs

Rembrand  Koning; John-Paul  Ferguson

Working Paper | HBS Working Paper Series | 2019

Does Public Ownership and Accountability Increase Diversity? Evidence from IPOs

by Rembrand Koning and John-Paul Ferguson

Abstract

Does public ownership improve employment diversity? Organizational researchers theorize that increased transparency to regulators and the public should lead firms to conform to legal and social norms—but that social closure and decoupling should preserve the status quo. Empirical research has been difficult because we lack data on comparable private firms and because firms likely self-select into going public. We construct a new, nationally representative dataset that links firms' filings for initial public offerings to longitudinal data on employment composition from the Equal Employment Opportunity Commission. We construct a set of comparable firms by looking at companies that filed and then withdrew a plan for an IPO. To account for selection bias in withdrawal and IPO success, we instrument the transition to public ownership using market returns in the book-building phase of the firms' IPO attempts. We find no evidence that moving from private to public ownership increases the representation of women or nonwhite workers or managers. We discuss the implications of this finding for our ability to generalize findings in organizational research.

Keywords: IPO; Initial Public Offering; Employees; Diversity; Gender; Race; Entrepreneurship; United States;

Language: English

Format: Print

36 pages

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Citation:

Koning, Rembrand, and John-Paul Ferguson. "Does Public Ownership and Accountability Increase Diversity? Evidence from IPOs." Harvard Business School Working Paper, No. 19-071, January 2019.

When do conversations lead people to generate better ideas? We conducted a field experiment at a startup boot camp to evaluate the impact of informal conversations on the quality of product ideas generated by participants. Specifically, we examine how the personality of an innovator (openness to experience, capturing creativity) and the personalities of her randomly assigned conversational peers (extroversion, measuring willingness to share information) affects the innovator's ideas. We find that open innovators who spoke with extroverted peers generated significantly better ideas than others at the boot camp. However, closed individuals produced mediocre ideas regardless of the individuals they interviewed, suggesting limited benefits of conversations for these people. More surprisingly, open individuals, who are believed to be inherently creative, produced worse ideas after they spoke with introverted peers, suggesting individual creativity's dependence on external information. Our study demonstrates the importance of considering the traits of both innovators and their conversational peers in predicting who will generate the best ideas.

We conduct a field experiment at an entrepreneurship bootcamp to investigate whether interaction with proximate peers shapes a nascent startup team's performance. We find that teams whose members lack prior ties to others at the bootcamp experience peer effects that influence the quality of their product prototypes. A one-standard-deviation increase in the performance of proximate teams is related to a two-thirds standard-deviation improvement for a focal team. In contrast, we find that teams whose members have many prior ties interact less frequently with proximate peers, and thus their performance is unaffected by nearby teams. Our findings highlight how prior social connections, which are often a source of knowledge and influence, can limit new interactions and thus the ability of organizations to leverage peer effects to improve the performance of their members.

Working Paper | 2019

The Value of Communication: Evidence from a Field Experiment with Entrepreneurs in Togo

Stefan Dimitriadis and Rembrand Koning

Why do some entrepreneurs benefit from their portfolio of peer advisers while others do not? In this study, we argue that communication practices are an important but overlooked factor in the formation of useful advice relationships between entrepreneurs, particularly in the context of developing economies. We hypothesize that improving entrepreneurs’ communication practices will affect the relationships they form and have implications for their business performance. To test our theory, we conducted a field experiment in Togo with 301 entrepreneurs who were randomized into a communication practices intervention that was embedded in a business training program. We found that entrepreneurs who were exposed to better communication practices perceived interactions more cooperatively and exchanged more information during those interactions. Moreover, improving communication practices also led to a 50 percent increase in the number of relationships entrepreneurs formed with peers. These relationships exhibited more matching based on skill and were more ethnically diverse. Finally, communication practices training also substantially increased entrepreneurs’ business performance. Our findings highlight how communication practices play a central role in entrepreneurs’ ability to form portfolios of relationships and perform in challenging business environments.

Keywords: communication practices; business relationships; Entrepreneurship; Communication; Developing Countries and Economies; Africa; Togo;

Citation:

Dimitriadis, Stefan, and Rembrand Koning. "The Value of Communication: Evidence from a Field Experiment with Entrepreneurs in Togo." SSRN Working Paper Series, No. 3459643, September 2019. View Details

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