PhD Seminar Series: When Rivals Go Public: Industry IPO Waves and Incumbents’ Employee-Oriented Practices

When Rivals Go Public: Industry IPO Waves and Incumbents’ Employee-Oriented Practices

Speaker: Yu Chen (Bocconi University)

Abstract: Industry IPO waves are widely studied as capital-market events that reshape the competitive conditions faced by incumbent firms. Less understood is how they alter incumbents’ labor-market environment and employment-side responses. We argue that industry IPO waves operate as talent-market shocks by enhancing newly public firms’ capacity to attract and hire specialized employees, thereby creating human-capital threats for incumbents that rely on similar talent. In response, incumbents strengthen employee-oriented stakeholder practices, a set of observable practices and commitments through which firms support employees as critical stakeholders and compete for specialized talent. Using a stacked difference-in-differences design in U.S. high-tech industries from 1995 to 2018, we find that incumbent firms significantly strengthen employee-oriented practices following industry IPO shocks. Corroborating evidence from inventor mobility data and employee reviews supports the proposed labor-market mechanism. The response is stronger among incumbents more exposed to IPO-induced talent competition, including firms with greater R&D intensity, higher product-market similarity to IPO firms, and closer geographic proximity to newly public rivals. These findings reveal an underexplored consequence of capital-market activity: IPO waves reshape not only incumbents’ external competitive environment but also how they manage employees as critical internal stakeholders.