Going Public and the Internal Organization of the Firm (R&R)
We examine how firms adapt their organization when they go public. IPO firms transform into a more hierarchical organization and increase managerial oversight. Organizational functions dedicated to accounting, finance, information technology, and human resources become more prominent. IPO firms turn around a large chunk of their labor force and almost their entire management to adapt their human capital to the new organization. New employees are better educated, but they possess less job- and industry-specific experience than incumbents and employees leaving the firm. The new organization facilitates internal transfers and job promotions. Overall, going public succumbs the firm to a transformation which reduces the firm’s dependence on individual employees and efficiently organizes the production process of a public firm.