* I would like to thank Frank Dobbin, Christopher Marquis, Peter ...
oth groups seeking to generate investment gains from the IPO. Income investors view IPOs as immediate cash transactions, while Growth investors view IPOs as collaboration with investment banks (underwriters) to generate long-term growth for their companies that will be reflected in higher near-term valuations. When companies want to list their shares for the first time, they must engage an investment bank to underwrite the new issuance of stock. Underwriters have a vested interest in first and second-stage returns and actively conduct institutional work to price IPOs attractively for buyers. Whereas the fierce contestation of all cash negotiations benefits issuers controlled by Income investors, the willingness of Growth investors to accommodate underwriters results in worse price outcomes for their companies. This study shows that the beliefs and perceptions of the Income logic significantly improve, while those of the Growth logic significantly worsen, IPO pricing for issuers even after taking into account behavioral and strategic considerations. Thus, institutional pluralism in the private investment field perpetuates differential IPO pricing, improving our understanding of the variation in returns for the approximately 800 operating company IPOs over the past ten years in the United States. Institutional logics meaningfully augment our understanding of price phenomena inexplicable for frameworks lacking institutional complexity and accentuate how cultural orientation matters not only for the prices under study but also for the study of such prices. Second-stage returns only represent “underpricing” for a neoclassical framework asserting capital market efficiency. Otherwise, from the cultural orientation that culture matters, first and second-stage returns are simply natural outcomes of differences in institutional logics rather than aberrant deviations from the “correct” value. Hence, understanding differences in sociocultural logics is critical for understanding the economic action of price determination and the study of such action. My primary contribution is 4
the introduction of institutional logics to price theory; in doing so, I explicate a long-standing unresolved research question in financial economics and demonstrate how logics can influence calculative rationality through their varying perceptions of objects. INSTITUTIONAL COMPLEXITY: LOGICS AND RATIONALITY Institutional logics are cultural assumptions, values, and beliefs that inform how actors perceive and interpret the environment (Friedland and Alford 1991; Thornton, Ocasio and Lounsbury 2012). The core hypothesis of the institutional logics perspective is that rationality and values vary by institutional orders (Thornton, Ocasio and Lounsbury 2012:2-4), or as Weber termed them “value spheres.” Friedland and Alford’s original concept of an interinstitutional system of oftentimes contradictory cultural orders resonates with Weber’s work on “social life as a polytheism of values in combat with one another” (Gerth and Mills  1958:70; Friedland, forthcoming). For Weber, “the various value spheres of the world stand in irreconcilable conflict with each other . . . [quoting John Stuart Mill:] if one proceeds from pure experience, one arrives at polytheism” (Weber  1958:147). While Friedland and Alford originally conceived of conflicting values across fields, research has increasingly pushed the concept of institutional heterogeneity into the meso-organizational level of analysis (Greenwood et al. 2011; Thornton, Ocasio and Lounsbury 2012). I apply the institutional logics framework, especially the Weberian notion of rationality as conditioned and contingent upon value spheres, to the IPO pricing process. Some analysts view logics as contradictory to instrumentally rational action, with logics determining the goals of value-rational action. 1 However, logics need not conflict with calculative rationality, but instead can inform the rational action of calculative actors by 5
! ! 7! Revenues (standardized) -1.8
! ! 9! (3.149) (3.085) (2.856) (3.4
! ! 11! Operating Cashflow (standar
! ! 13! (0.436) (0.433) Positive Ea
! ! 15! Table 9: Venture Capital-co