Valuing University–Based Firms: The Effects of Academic Affiliation on IPO Performance

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Abstract
This paper investigates for the first time the valuation of university–based companies and their ability to translate the potential benefits of academic affiliation into long–term performance gains. It contributes to the literature on technology transfer by expanding the view from the product market to the financial market. Among the 499 high–tech SMEs that went public on the stock markets of Germany, the U.K., France, and Italy between 1995 and 2003, we find that 131 were university–based firms. For firms who publicize the fact that they are university based and have chosen to go public, the affiliation with a university is recognized as beneficial by investors. Our econometric models show that affiliation with a university enhances valuation, in particular when academics are present in the Top Management Team at the time of the initial public offering. However, over the long run, university–based companies exhibit worse operating performance than independent firms.

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