Submit your papers for the Spring 2024 series


Ye Zhang (SSE)

Paper Title: Does ESG Investing Help VC Funds to Attract Startups? Experimental Evidence

This paper studies how venture capitalists’ (VCs) ESG investments affect startups’ fundraising decisions, using complementary experiments with actual US startup founders. Results reveal the divergent effects of E and S. Founders are reluctant to collaborate with environmental VCs due to concerns about profitability and the likelihood of securing investment. However, founders, particularly those with ESG focus, favor social VCs partially due to their social preferences. A novel payment game experiment further confirms the existence of founders’ ESG preference in their fundraising endeavors. Lastly, there exist substantial heterogeneous effects based on founders’ political affiliations, industry backgrounds, investor gender, and market conditions.

Presenter: Ye Zhang (SSE)


Discussant: Emanuele Colonelli (Booth)


Yuheng Ding (World Bank)

Paper Title: Mega Firms and Recent Trends in the U.S. Innovation: Empirical Evidence from the U.S. Patent Data

We use the U.S. patent data merged with firm-level datasets to establish new facts about the role of mega firms in generating “novel patents”—innovations that introduce new combinations of technology components for the first time. While the importance of mega firms in novel patents had been declining until about 2000, it has strongly rebounded since then. The timing of this turnaround coincided with the ascendance of firms that newly became mega firms in the 2000s, and a shift in the technological contents, characterized by increasing integration of Information and Communication Technology (ICT) and non-ICT components. Mega firms also generate a disproportionately large number of “hits”—novel patents that lead to the largest numbers of follow-on patents (subsequent patents that use the same combinations of technology components as the first novel patent)—and their hits tend to generate more follow-on patents assigned to other firms when compared to hits generated by non-mega firms. Overall, our findings suggest that mega firms play an increasingly important role in generating new technological trajectories in recent years, especially in combining ICT with non-ICT components.

Presenter: Yuheng Ding (World Bank)

Coauthors: Serguey Braguinsky, Joonkyu Choi, Karam Jo & Seula Kim

Discussant: Tim Simcoe (Boston Univ.)



Wei Yang Tham (Harvard)

Paper Title: Money, Time, and Grant Design

The design of research grants might be a useful tool for incentivizing more socially valuable science. To better understand the value of grant design as a policy instrument, we conduct two sets of thought experiments in a nationally representative survey of academic researchers. First, we test whether grants with randomized attributes induce different research strategies. Longer grants increase researchers’ willingness to take risks, but only amongst tenured professors, suggesting that job security and grant duration are complementary incentives. Larger grants increase researchers’ willingness to expand ongoing projects, while smaller grants increase researchers’ focus on starting new projects. In our second experiment, we estimate researchers’ willingness to trade off grant size and duration. We find that researchers are relatively unwilling to trade off the amount of funding a grant provides in order to extend the duration of the grant — more money is much more valuable than more time.

Presenter: Wei Yang Tham (Harvard)

Coauthors: Kyle Myers (Harvard)

Discussant: Carolyn Stein (UC Berkeley)


Ayako Yasuda (UC Davis)

September 25, 2023

Paper: Do Investors Overvalue Startups? Evidence from the Junior Stakes of Mutual Funds (pdf)

We show that mutual funds report their junior stakes in startups at 43% higher valuation than model fair values that consider multi-tier capital structures of startups. The latest-issued and most senior security is worth 48% per share than junior securities held by mutual funds, implying that mutual funds mark junior securities close to par with the senior securities. Our findings are robust to model assumptions. Identical valuations reported for dual holdings of senior and junior securities imply 37% discrepancy in implied values of the firm. Overvaluation is lower for fund families with longer experience in private startup investments, and higher for junior securities purchased in secondary transactions. Overvaluation declines after down rounds (new financing rounds with purchase prices lower than previous rounds) and near IPOs. The results are consistent with mutual funds neglecting the probability of negative outcomes in which junior securities are paid less than senior securities and overweighting successful exits where all securities convert to common equity and are valued equally.

Presenter: Ayako Yasuda (UC Davis)

Coauthors: Vikas Agarwal, Brad M. Barber, Si Cheng, Allaudeen Hameed and Harshini Shanker

Discussant: Minmo Gahng (Cornell)


Viola Salvestrini (Queen Mary University of London)

Title: “Early exposure to entrepreneurship and the creation of female entrepreneurs”

Using registry data from Denmark, we track the educational and professional choices of one million individuals from adolescence to adulthood and investigate the effects of early exposure to entrepreneurs on the gender gap and the allocation of talent in entrepreneurship. We exploit within-school, across-cohort variation in adolescents’ exposure to entrepreneurship, as measured by the share of their peers whose parents are entrepreneurs during the last years of compulsory schooling. We find that higher exposure to entrepreneurs during adolescence narrows gender gaps in entrepreneurship by encouraging girls’ entry and tenure into this profession. The effect is driven by exposure to the parents of female peers and works via a decrease in girls’ likelihood to discontinue education at the end of compulsory schooling and to hold low-paying jobs as adults. The firms created by women are larger and survive longer than the average firm, indicating that a pool of innately talented entrepreneurs are not pursuing their comparative advantage due to gender-specific entry barriers. Our results suggest that such barriers are both cultural and informational in nature and that raising women’s early exposure to entrepreneurship from the 25th to the 75th percentile would increase the total number of jobs created by entrepreneurs by 5.3%.

Presenter: Viola Salvestrini (Queen Mary University of London)

Coauthors: Mikkel Baggesgaard Mertz (Queen Mary University of London) and Maddalena Ronchi (Bocconi University)

Discussant: Kristoph Kleiner (Indiana University)


Julia Fonseca (University of Illinois Urbana-Champaign)

Title: “How Much Do Small Businesses Rely on Personal Credit?”

This paper estimates the degree of substitution between personal and small business credit for U.S. entrepreneurs between 2009 and 2018 using a novel, individual-level dataset. We identify the effect of business credit supply shocks by exploiting geographic variation in the market share of large banks, which sharply reduced credit supply to small businesses after the 2008 financial crisis. This contraction decreased total business credit by $13,572 per firm in our sample, and we find that entrepreneurs were able to substitute for about 68% of this decline with personal credit, driven by mortgages. Entrepreneurs with subprime credit scores, below-average income, and high credit utilization do not substitute lost business credit with personal credit. Thus, we find that the personal financial characteristics of entrepreneurs meaningfully affect overall access to external finance for small businesses.

Presenter: Julia Fonseca (University of Illinois Urbana-Champaign)

Coauthors: Jialan Wang (University of Illinois Urbana-Champaign and NBER)

Discussant: Manuel Adelino (Duke University)