Getting Past the “Entrepreneurial Growth Ceiling”: A Longitudinal Study of IPO Firm Growth Through Solution Driven Strategies

Abstract

In this paper we introduce a concept that we call the Entrepreneurial Growth Ceiling (EGC). We develop arguments that new venture IPOs hit the EGC prior to their IPO, and the ceiling is part of the impetus for going public. The EGC represents a set of problems, and we hypothesize that a firm’s ability to break through the ceiling quickly (within a year following the IPO) is critical for long-term performance. We argue that proceeds from the IPO will aid firms in breaking through the ceiling if the proceeds are strategically allocated. Results indicate firms that allocate proceeds to human resources and research and development (R&D) resources are more likely to break through the EGC quickly and enhance long-term stock performance.