Quality (philosophy)

Marketing

Initial public offering

Philosophy

Statistics

Business administration

Chromatography

Underwriting

Accounting

Economics

Business

Mathematics

Management

Reputation

Entrepreneurship

Political science

Significant difference

Epistemology

Valuation (finance)

Social venture capital

Venture capital

Chemistry

Sample (material)

Finance

Commercialization

Investment banking

Journal of Business Venturing

This paper studies the combined effect of affiliation with prestigious universities, underwriters, and venture capitalists on the valuation of biotech ventures at IPO and their post-IPO performance. We argue that affiliation to a prestigious university provides the affiliated firm with a quality signal in the scientific domain. The pure quality signaling effect of the affiliation is isolated from the substantive benefits it provides by performing a difference-in-difference approach based on the scientific reputation of scientists in firms' upper echelons. The signal is stronger the weaker is the scientific reputation of scientists of the focal IPO-firm and is additive to those provided by prestigious venture capitalists and underwriters. Results for a sample of 254 European biotech ventures that went through an IPO between 1990 and 2009 confirm our predictions.

Signaling in science-based IPOs: The combined effect of affiliation with prestigious universities, underwriters, and venture capitalists