Plant the seeds of innovation before your IPO: How innovation imprinting helps companies remain innovative after they go public The document discusses how going public can reduce manager incentives to invest in breakthrough innovations due to stock market pressures, leading to a post-IPO innovation slump. It introduces the concept of "innovation imprinting," which involves establishing priorities and building capabilities for breakthrough innovations before an IPO. Innovation imprinting attracts investors who support risk and innovation, allowing companies to continue innovating after going public. The study observed 207 IPO firms over 30+ years and found that while most experienced a slump, companies that engaged in pre-IPO innovation imprinting were able to "beat the slump" and

1. Plant the seeds of innovation
before your IPO:
How innovation imprinting
helps companies remain
innovative after they go
public

2. Stock market pressures reduce manager incentives
to invest in breakthrough innovations
Post-IPO innovation slump:
Firms reduce riskiness of new
product introductions after IPO
Taking Tesla private would allow
the company to operate "free
from as much distraction and
short-term thinking as possible"
(Elon Musk 2022)
When striving to meet Wall
Street’s quarterly demands, it is
“… not always possible to focus
on innovating for customers”
(Michael Dell 2014)
From: Wies, Moorman, and Chandy (2022)

3. From: Wies, Moorman, and Chandy (2022)
What is Innovation imprinting?
Establishing product priorities and building
market capabilities associated with
breakthrough innovations
• Breakthrough innovation emphasis
• Breakthrough innovation pacing
• Breakthrough innovation bundling
• Leveraging capabilities

4. From: Wies, Moorman, and Chandy (2022)
Innovation imprinting protects firms from the
post-IPO innovation slump
• Effect: Companies that engage in innovation imprinting before the IPO continue to introduce breakthrough
innovations after going public (“beating the post-IPO innovation slump”)
• How it works: Innovation imprinting attracts a segment of investors whose risk preferences are more supportive
of innovation and who are more forgiving of short-term fluctuations in performance that can often accompany
innovation
• What is the impact: Companies continue to innovate after the IPO, which helps them survive longer and
experience stronger financial performance
• Data: Observed 207 IPO firms in the CPG industry over more than 30 years

5. From: Wies, Moorman, and Chandy (2022)
Implications
These findings challenge the idea that the stock market causes an inevitable adoption
of a risk averse approach that discourages breakthrough innovation
Beating the
slump
The post-IPO
innovation slump
30%
70%
 Managers can help their firms remain innovative
by planting the seeds of innovation before they
go public through a set of actionable and
marketing-related activities (“innovation
imprinting”)
 Findings highlight that segmentation principles
also apply to investors
While most firms
succumb to the slump,
one-third resist