• Managers’ and directors’ liability. In the same period public company managers and directors became more vulnerable to stockholder lawsuits and related enforcement actions by the SEC and state attorneys general. Litigation is expensive and, again, a distraction for senior management focused on firm growth.

• IP litigation. Intellectual property represents another example of increased litigation. The rising number of lawsuits claiming patent infringement was leading to more defensive patenting to fend off litigation. Some participants hypothesized that acquisitions may be fueled in part by the motivation of both sellers and buyers to build patent portfolios that would discourage would-be plaintiffs.

Unable to suggest any countervailing market or policy changes making an IPO a more rather than less attractive exit strategy for investors, some workshop participants thought it would be difficult to disentangle the effects of reinforcing trends in order to identify what policy changes might be warranted and effective in restoring the traditional role of IPOs in high technology firm development. Others, however, considered changes in transaction costs a prime area for study.

Having considered the cyclical versus secular or structural changes in patterns of investor exits from young entrepreneurial firms and the difficulty of establishing the causes of such changes, several workshop participants expressed the opinion that the most challenging research task, and one critical to bringing about any public policy changes, would be to link exit patterns to macroeconomic effects such as job creation, productivity advances, economic growth, and competitiveness or to stagnation or under-performance in any of those measures of economic performance. Ed Penhoet observed, “There are many correlations, but causality is a challenge.”