We describe two theoretical explanations for the amount, pace, and costs of the prestige enhancement a firm engages in during the year before its initial public offering. The "snowball model" captures well-known processes whereby prestige-rich organizations accumulate even more prestige. The "dressing-up model" builds upon deadline-induced remediation, a phenomenon not previously studied in a macro-organizational context. In 242 software IPOs, the snowball model substantially explains final-year prestigious hiring. But there is also strong evidence of a tandem dressing-up process. As the final year counts down, prestige-poor firms aggressively hire prestigious executives and directors and pay higher prices to do so.
All Science Journal Classification (ASJC) codes
- Business and International Management
- Business, Management and Accounting(all)
- Strategy and Management
- Management of Technology and Innovation