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Stanford Study Finds Going Public Hurts Innovation

Google's stock price appears on the Nasdaq Marketsite just before the markets close Aug. 19, 2004
Google's stock price appears on the Nasdaq Marketsite just before the markets close Aug. 19, 2004Photograph by Getty Images

Call it the paradox of stock options.

Companies that succeed in going public tend to “find that the quality of internal innovation declines” post-IPO, according to a meticulous new study (PDF) by Shai Bernstein, assistant finance professor at the Stanford Graduate School of Business. Not only does the level of innovation fall at newly public companies, but top inventors there tend to bail, the study found. Those who remain to watch their options vest, meanwhile, suffer “a decline in productivity.”