Puttin’ on the Ritz: Pre-ipo Enlistment of Prestigious Affiliates as Deadline-induced Remediation

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.