Which Resources Matter in Initial Public Offering Firms? A Longitudinal Comparison of Five Resources’ Contributions to Firm Performance

This paper has not undergone formal review or approval of the faculty of the ILR School. It is intended to make results of Center research available to others interested in preliminary form to encourage discussion and suggestions. Abstract In order to better understand the relevant resources in the resource based view of the firm, this study examines which resources executives in initial public offering (IPO) firms think are important to their success two years after the IPO. Results indicate that managers recognized five different resources as important, with the executives considering themselves (management) to be the most important resource. The effect of all five resources (culture, human resource management [HRM] practices, management, technology, and product/marketing) on both short and long-term firm performance was studied. Results show that management and technology are considered important by the investment community, with both affecting short-term IPO firm performance. However, analyses on long-term performance suggest that the key role management plays may be due to management's ability to develop synergies with people who are key to the organization's success — both employees and customers. Experience has taught me that it's easy to talk about values, hard to implement them, and even harder for an outsider to determine which values are heartfelt and which are window-dressing. Wall Street cannot place a value on values. Howard Schultz, Founder and CEO Starbucks Coffee Growing competition in world markets has resulted in an increased emphasis being placed on understanding how organizations utilize their firm specific assets to compete. This interest in the internal aspects of the organization as a means of competition led to the increased popularity of the resource based view of the firm (Barney, 1991, Wernerfelt, 1984). The resource based view of the firm argues that a firm's sustainable competitive advantage stems from resources that are valuable, rare, inimitable, and for which substitutes do not exist (Barney, 1991). The basic implication of the theory is that managers should seek to develop and exploit the firm's resources which possess these characteristics (Barney, 1995). In fact, Aaker (1989) identified the route to sustainable competitive advantage as consisting of (1) identifying the relevant assets and skills, (2) selecting the assets and skills which will be relevant to the future needs of the market, and (3) implementing programs which will develop, enhance, and/or protect these assets and skills. While the process proposed by Aaker (1989) is straightforward, it is far from …