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The Effect of External and Internal Resource Dependency on Foreign IPO Underpricing

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한국국제경영학회 (Korean Academy of International Business)|2021.02|국제경영연구 (International Business Journal)|제32권 제1호|pp. 83-115|DOI http://dx.doi.org/10.14365/ibj.2021.32.1.3

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참고문헌

키워드

Underpricing지식자원Resource dependency theoryForeign IPOKnowledge resource자원의존도이론해외기업공개신규 공모주 저평가
주제분류경영학

초록

This study offers empirical evidence on how foreign initial public offering(IPO) firms' level of resource dependency determines the underpricing level. Given that securing resources is essential to IPO firms, we suggest that foreign IPO firms' vulnerability toward the continued relationship with resource providers is an important factor that can shape the attractiveness of investing in foreign IPO firms. As existing IPO studies have overlooked the business risk involved with the high dependence on resource providers, we provide theoretical and empirical insights into the impact of dependency on resource providers on the underpricing level. Furthermore, we expand existing studies that have mainly focused on dependency on external resource providers(supplier, manufacturer, and distributor) by emphasizing the role of dependency on internal resource providers(key executives) in determining the level of IPO underpricing. We also suggest that the effect of external and internal dependency risk on underpricing depends on the level of a IPO firm's knowledge resources. Higher knowledge intensity improves the bargaining power of IPO firms over the external resource providers and reduces the risk of losing the relationship. On the contrary, as executives' managerial expertise in knowledge-intensive IPO firms is essential, higher knowledge intensity implies intensified internal dependency risk.

Abstract

This study offers empirical evidence on how foreign initial public offering(IPO) firms' level of resource dependency determines the underpricing level. Given that securing resources is essential to IPO firms, we suggest that foreign IPO firms' vulnerability toward the continued relationship with resource providers is an important factor that can shape the attractiveness of investing in foreign IPO firms. As existing IPO studies have overlooked the business risk involved with the high dependence on resource providers, we provide theoretical and empirical insights into the impact of dependency on resource providers on the underpricing level. Furthermore, we expand existing studies that have mainly focused on dependency on external resource providers(supplier, manufacturer, and distributor) by emphasizing the role of dependency on internal resource providers(key executives) in determining the level of IPO underpricing. We also suggest that the effect of external and internal dependency risk on underpricing depends on the level of a IPO firm's knowledge resources. Higher knowledge intensity improves the bargaining power of IPO firms over the external resource providers and reduces the risk of losing the relationship. On the contrary, as executives' managerial expertise in knowledge-intensive IPO firms is essential, higher knowledge intensity implies intensified internal dependency risk.

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