Using exogenous variations in the market value of corporate real estate, this paper investigates whether appreciation of corporate collateral value facilitates innovation. My baseline finding shows that real estate appreciation leads to an increase in innovation quantity as measured by patent productions and in innovation quality as measured by citations per patent, especially when firms are credit constrained. To uncover the underlying channel, I show that real estate appreciation allows additional secured borrowing, which enables firms to increase their innovative investments including internal research and development (R&D), the acquisition of innovative target firms, and corporate venture capital (CVC). Moreover, following real estate appreciation, firms change the trajectory of innovation, as reflected in the patent-filing industries and in the characteristics of acquisitions and CVC investment deals. Finally, I provide evidence that firms that innovate more in response to real estate appreciation tend to have better future financial health and accounting profitability.

We investigate the effect of pre-IPO investments by public market institutional investors (institutions) on the exit of venture capitalists (VCs). Results indicate that institutions’ pre-IPO investments reduce IPO underpricing by mitigating VCs’ reliance on all-star analysts to boost market liquidity. We conclude that institutions facilitate VC exits in the secondary market. Supporting this view, our analysis reveals that the presence of institutions allows VCs to exit with a reduced price impact in the secondary market. Consistent with the ease of exit, VCs offer fewer shares at the IPO and are more likely to invest in institutionally backed startups.