R&D Spending And Sources Of Funding Of Private US Biopharmaceutical Firms Seeking To Go Public

ASU Author/Contributor (non-ASU co-authors, if there are any, appear on document)
Richard W. Pouder PhD, Professor (Creator)
Institution
Appalachian State University (ASU )
Web Site: https://library.appstate.edu/

Abstract: This study analyzes the relationship between the amount of research and development (R&D) spending in private US biopharmaceutical firms before they go public and whether or not these firms tap into external sources of funding for investment before an initial public offering. We focus our study on three specific sources of funding (venture capital investors, biopharmaceutical firm investors and strategic alliance partners) for two different time periods (one year prior to firms going public and cumulative years prior to going public). We found an increase in R&D spending over the course of the study and a positive relationship between R&D spending in the year prior to its going public and venture capital involvement. We also found a positive relationship between the cumulative amount spent on R&D and venture capital involvement and ownership by other biopharmaceutical firms. We use the literature on tradable assets and signaling theory to interpret the implications of our findings. For managers, the results suggest that if their goal is to send signals to future investors by way of spending greater amounts on R&D in the year prior to going public, then venture capital investors are more likely to be associated with this type of activity.

Additional Information

Publication
Williams, D. & Pouder, R. (2010). "R&D Spending And Sources Of Funding Of Private US Biopharmaceutical Firms Seeking To Go Public." Journal of Commercial Biotechnology (2010) 16, 284 – 292. doi: 10.1057/jcb.2010.12; published online 17 August 2010. Publisher version of record available at: https://doi.org/10.5912/jcb.v16i4
Language: English
Date: 2010
Keywords
research and development funding, initial public offering, venture capital, signaling investors

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