This study investigates earnings management of IPO firms in knowledge-based-industry. we analyze the relation between earnings management and R&D expenses(Research and development expense) which is an important expenditure in knowledge based management. First, we found that the earnings management is the largest in the year when the firm is enrolled on the market. Second, the IPO firms have higher DA(discretionary accruals) than existing firms on the market and the size of R&D expenses is larger, too. Finally, in the IPO firms in knowledge-based-industry, the higher accounting receivable and R&D expenses are, the more happens earnings management. Our study shows that the IPO firms of knowledge-based industry have high R&D expenses which are core expenditure. Also, earnings management has happened frequently in the IPO firms.