Why Does a Firm Go Public? An Organizational Explanation.

Initial public offering (IPO) is a milestone for a firm. Identifying access to capital and increased legitimacy as primary drivers for the IPO, extant literature theorizes going public as being a onetime rational decision and downplays power dynamics within organizations. Reconstructing a detailed history of the first IPO in China's education and training industry, I offer an organizational explanation from the perspective of conflict and power coalition. I argue that a firm's institutionally-induced internal conflicts, especially when escalated in the process of finding a pragmatic solution to these conflicts, are a critical but neglected impetus for a firm's IPO. My case shows that internal conflicts tend to be intense and prolonged when there is a high level of institutional complexity, due to fluid coalition lines and the vast amount of room available for internal actors' to make interpretations of the situation in their own favor. In this situation, conventional solutions that would normally solve a conflict trigger more intense conflicts along other lines. The IPO eventually emerges as both a novel and the only solution to conflicts. I identify two mechanisms through which internal conflicts contribute to an IPO: organizational lock-up and professionalization of financial management. [ABSTRACT FROM AUTHOR]