Abstract
The purpose of this paper is to examine the legitimacy of biotechnology firms in their initial attempt to access public equity financing. Generally, at the time of their initial public offering (IPO), biotech pharmaceutical firms do not have a profitable record of income and have not achieved Federal Drug Administration (FDA) approval for their products. They need to access financing to further their research and development, earn FDA approval, market their approved products, and eventually generate profits. Despite their lack of profits and finished products, biotech firms sell stock. The authors explain the sale of public equity in terms of legitimacy. More specifically,they use Scott's (1995) three forms of legitimacy--regulative, normative, and cognitive. Two forms of legitimacy were indicated, and both were positively related to market value