http://paul.kedrosky.com/archives/2011/11/going-public-decreases-innovation.html

This article moved to: http://paul.kedrosky.com/wp/archives/2011/11/going-public-decreases-innovation.html

Oddly, I would have guessed the opposite based on evidence in the tech world:

• Apple launched iPhone and iPad while public;

• Google bought and launched Android while public;

• Amazon launched Amazon Web Services and Kindle while public;

• Microsoft launched Xbox while public.

Google and Microsoft are even more interesting in that they're willing to have public failures like Wave and Buzz and Zune and Kin.

My two cents here, prefaced with the disclaimer that I've only read the abstract from that paper (!).

Having been where I am for a while, I've observed first-hand how a growing company slows down as its processes change to adapt to the increased size of the organization. The newer folks just don't get quite how things were founded either, so there is a kind of ongoing onboarding overhead too. Introducing outside investors changes the focus of the company from "we're in this to do cool stuff and make money" to "we're in this to make money, and uh, yeah, do cool stuff too (but we money to keep VC happy!)".

I've not worked somewhere that's gone public, but I can imagine how this change in focus (relative to startup culture) can only make it harder to innovate, especially around the time of the transition (leadership is distracted by the transition itself) and the additional auditing and governance overheads of being a public company--more process to deal with.

As Adam points out, the evidence of public companies innovating is out there; perhaps that article would be better phrased as "Going Public Makes it Harder to Innovate"; rather than a direct causation, there's correlation.