Would an initial public offering (IPO) in a growing and uncertain industry have a positive or negative effect on directly competing incumbent firms in the industry? We assert that due to the risk and uncertainty inherent in a growing industry, a firm's IPO may send a positive market signal of growing industry demand. An IPO can send a signal to the investors of directly competing incumbents that the market is promising, and incumbent firms will enjoy a better future. If directly competing incumbent firms are capable of capturing these positive externalities, they will experience even greater positive results. In particular, an incumbent firm with a significant research and development investment may capture more of this increased demand in the industry. On the other hand, if a market segment is more concentrated, it is more likely that directly competing incumbents will suffer when another firm announces an IPO. We find supporting results for the various arguments of our initial question examining the computer-related service industry. We also present discussion and implications for our results. Copyright © 2011 Strategic Management Society.