The long-run role of innovation in the IPO market: inhibition or promotion?

This study investigates the long-term role of innovation in the Chinese IPO market. Innovation outcome (patent) has a promoting effect on the long-term market, while innovation input (R&D) shows a variable inhibitory control, which turns into a favourable impact four years after the IPO due to lag and cumulative effects. Moreover, this inhibitory effect increases and has no positive turnback in firms with R&D myopic management. Furthermore, government subsidies strengthen the effect of innovation during different periods while weakening the positive effect of innovation input four years after the IPO due to firms' rent-seeking behaviour aiming to obtain government funds.