Register for Lindsey Raymond's seminar, April 15th



Learning through experimentation is important in both startup and large company innovation. This presentation will review the growing literature on these topics within finance and entrepreneurship and highlight promising areas of further work.

Lecturer: Ramana Nanda (HBS)
Date: February 22nd, 2021

Lecture Slides


Reading list

Kerr, William R., Ramana Nanda, and Matthew Rhodes-Kropf. “Entrepreneurship as Experimentation.” Journal of Economic Perspectives 28, no. 3 (Summer 2014): 25–48.

Asymmetric information between principals and agents: Implications for optimal contracting

Dirk and Ulrich Hege. “Venture capital financing, moral hazard, and learning”, Journal of Banking and Finance, 22.6-8 (1998): 703-735.

Bergemann, Dirk and Ulrich Hege. “Financing of Innovation: Learning and Stopping, The RAND Journal of Economics Vol. 36.4 (2005): 719-752.

Dixit, Robert K., Avinash K. Dixit, and Robert S. Pindyck. Investment under uncertainty. Princeton university press, 1994.

Manso, Gustavo. “Motivating innovation.” The Journal of Finance 66.5 (2011): 1823-1860.

Cornelli, Francesca and Oved Yosha. “Stage Financing and the Role of Convertible Securities.” The Review of Economic Studies 70.1 (2003): 1-32.

Acharya, Viral V., and Krishnamurthy V. Subramanian. “Bankruptcy codes and innovation.” The Review of Financial Studies 22.12 (2009): 4949-4988.

Azoulay, Pierre, Joshua S. Graff Zivin, and Gustavo Manso. “Incentives and creativity: evidence from the academic life sciences.” The RAND Journal of Economics 42.3 (2011): 527-554.

Tian, Xuan, and Tracy Yue Wang. “Tolerance for failure and corporate innovation.” The Review of Financial Studies 27.1 (2014): 211-255.

Gonzalez-Uribe, Juanita, and Moqi Groen-Xu. “CEO contract horizon and innovation.” Available at SSRN 2633763 (2017).

Costs and constraints to financing experimentation (even with symmetric uncertainty): Impact on realized innovation

Ewens, Michael, Ramana Nanda, and Matthew Rhodes-Kropf. “Cost of experimentation and the evolution of venture capital.” Journal of Financial Economics 128.3 (2018): 422-442.

Nanda, Ramana. “Financing ‘Tough Tech’ Innovation.” Global Innovation Index 2020: Who Will Finance Innovation? (2020): 113.

Nanda, Ramana, and Matthew Rhodes-Kropf. “Investment Cycles and Startup Innovation.” Journal of Financial Economics 110.2 (2013): 403–418.

Nanda, Ramana, and Matthew Rhodes-Kropf. “Financing Risk and Innovation.” Management Science 63.4 (2017a): 901–918.

Hellmann, Thomas and Viekko Thiele, “Friends or foes? The interrelationship between angel and venture capital markets” Journal of Financial Economics, 115.3 (2015): 639-653.

Howell, Sabrina, Josh Lerner, Ramana Nanda and Richard Townsend. “How Resilient is Venture-Backed Innovation? Evidence from Four Decades of U.S. Patenting” HBS Working Paper 20-115.

Nanda, Ramana, and Matthew Rhodes-Kropf. “Innovation Policies.” In Entrepreneurship, Innovation, and Platforms, Advances in Strategic Management, 37, edited by Jeffrey Furman, Annabelle Gawer, Brian Silverman, and Scott Stern, (2017b): 37–80.

Entrepreneurial decision-making / Entrepreneurial Strategy

“Experimentation and the Returns to Entrepreneurship” Review of Financial Studies,29 (2016): 2319-2340

Dillon, Eleanor W., and Christopher T. Stanton. Self-employment dynamics and the returns to entrepreneurship. No. w23168. National Bureau of Economic Research, 2017.

Ewens, Michael, Ramana Nanda, and Christopher T. Stanton. The Evolution of CEO Compensation in Venture Capital Backed Startups. No. w27296. National Bureau of Economic Research, 2020.

Gans, Joshua S., Scott Stern, and Jane Wu. “Foundations of entrepreneurial strategy.” Strategic Management Journal 40.5 (2019): 736-756.

Agrawal, Ajay, Joshua S. Gans, and Scott Stern. “Enabling Entrepreneurial Choice.” Management Science (2021).

Camuffo, Arnaldo, et al. “A scientific approach to entrepreneurial decision making: Evidence from a randomized control trial.” Management Science 66.2 (2020): 564-586.

Felin, Teppo and Gambardella, Alfonso and Zenger, Todd R., “Value Lab: A Tool for Entrepreneurial Strategy”. Management & Business Review, forthcoming.

Koning, Rembrand, Sharique Hasan, and Aaron Chatterji. “Digital Experimentation and Startup Performance: Evidence from A/B Testing.” (2019) Harvard Business School Working Paper, No. 20-018.

Spillovers: learning from results of others’ experiments

Krieger, Joshua L. “Trials and terminations: Learning from competitors’ R&D failures.” Management Science (2021).

Akcigit, Ufuk and Qingmin Liu. “The Role of Information in Innovation and Competition.” Journal of the European Economic Association, 14.4 (2016): 828-870.

Bolton, Patrick and Christopher Harris, “Strategic Experimentation” Econometrica, 67.2 (1999): 349-374.