Executive Pay Before and After Technology IPOs: Who Receives More?

Abstract

Technology IPOs expose Information Technology (IT) firms to significant challenges that are fundamentally different from those faced during the founding or startup stage. To tackle the post-IPO challenges, IT firms pay premium wages to hire professional executives from the external labor market rather than from within. Yet, how the executive pay of external hires compares to that of internal hires when IT firms mark significant milestones in their lifecycle remain understudied. The current study therefore examines the pay of internal and external hires and place it within the context of the IPO timeline i.e. pre- and post-IPO. By analyzing data from multiple sources using a linear mixed effects modelling technique, we find that IT firms pay internal hires significantly higher than external hires in the pre-IPO stage. In the post-IPO stage, IT firms pay external hires significantly higher than internal hires. We discuss the implications of the findings on theory and practice.