Venture capital, new public firms and the transformation of United States manufacturing

This dissertation examines the dramatic transformation of U.S. manufacturing at the end of the 20th century. Between 1970 and 2001, over one-half of the nearly 3,500 IPOs in manufacturing occurred in just six high-tech industries. The share of public firms in these industries rose from 14% to 47%. The first essay considers the long-run performance of IPOs financed with venture capital, and the next two essays explore the importance of new public entrants in the transformation.;While venture capital has been an important source of finance for private high-tech firms, little is known about the long-run performance of venture-backed firms. In the first essay I examine a carefully matched set of venture- and non-venture backed high-tech firms that went public between 1980 and 1989. I find that annual growth rates are much higher for venture-backed firms for almost a decade after they go public, though the growth rates of venture- and non-venture-backed firms eventually converge. Because of faster initial growth, a decade after the IPO the venture-backed firms are substantially larger at the median and dramatically larger on average. In addition, venture-backed firms are much more R&D intensive and have a much greater impact on the high-tech sector.;In the second essay I find that new public entrants into the high-tech sector generally caused incumbents to lose most of their pre-1970 market share, and in many cases the entrants grew to become the leading firms in their respective industries. New public entrants have also been much more R&D intensive than incumbents, and this R&D intensity has increased over time. By 2001 new public entrants accounted for 31% of the public-firm R&D in manufacturing, and 25% of the public-firm R&D in the economy. In addition, public entrants into high-tech have very low leverage and have driven a pronounced increase in the use of follow-up new equity finance over the last three decades. The third essay demonstrates that IPOs financed with venture capital have been especially crucial to the transformation, and by 2000 accounted for a much larger share of high-tech firms, sales, R&D and market value than the non-venture-backed entrants.