This article documents the fact that ventures funded by two successful angel groups experience superior outcomes to rejected ventures: They have improved survival, exits, employment, patenting, Web traffic, and financing. We use strong discontinuities in angel- funding behavior over small changes in their collective interest levels to implement a regression discontinuity approach. We confirm the positive effects for venture operations, with qualitative support for a higher likelihood of successful exits. On the other hand, there is no difference in access to additional financing around the discontinuity. This might suggest that financing is not a central input of angel groups.

We analyze how contractibility affects contract design. A major concern when designing research agreements is that researchers use their funding to subsidize other projects. We show that, when research activities are not contractible, an option contract is optimal. The financing firm obtains the option to terminate the agreement and, in case of termination, broad property rights. The threat of termination deters researchers from cross-subsidization, and the cost of exercising the termination option deters the financing firm from opportunistic termination. We test this prediction using 580 biotechnology research agreements. Contracts with termination options are more common when research is non-contractible.

The Economics of Copyright "Fair Use" in a Networked World by Benjamin Klein, Andres V. Lerner and Kevin M. Murphy. Published in volume 92, issue 2, pages 205-208 of American Economic Review, May 2002

Venture capital distributions, a legal form of insider trading, provides an ideal arena for examining the share price impact of transactions by informed parties. These sales, which occur after substantial run‐ups in share value, generate a substantial price reaction immediately around the event. In the months after distribution, returns apparently continue to be negative. When the short‐ and long‐run reactions are decomposed, they are consistent with the view that venture capitalists use inside information to time stock distributions: Distributions of firms brought public by lower quality underwriters and of less seasoned firms have more negative price reactions.

“Founder-friendly” venture financings and nontraditional venture investors have both flourished over the past decade. Using detailed contract data, we study open-end mutual funds investing in private venture-backed firms. We posit that conflicts between early-stage venture investors and liquidity-constrained later-stage ones influence the classic agency problems affecting entrepreneurs and investors. We find that mutual funds with more stable funding are more likely to invest in private firms and that financing rounds with mutual fund participation have stronger redemption, stronger IPO-related rights, and less board representation. These findings are consistent with our conceptual framework.

Do impact investors seek impact, or merely “impact wash”? We provide systematic evidence on the nonfinancial determinants of impact investing. Impact investors focus on firms aligned with the priorities of the federal government and disproportionately invest in economically disadvantaged regions. While we find high levels of coinvestment between impact and traditional investors, we also show that impact investors influence the strategies of their traditional coinvestors, are more likely to fund firms in nascent industries, and invest countercyclically. Finally, we characterize investment heterogeneity based on a novel classification of impact investment theses, with a focus on climate, environment, and jobs and equity.

Using a difference-in-differences approach, we study how intellectual property right (IPR) protection affects innovation in China in the years around the privatizations of state-owned enterprises (SOEs). Innovation increases after SOE privatizations, and this increase is larger in cities with strong IPR protection. Our results support theoretical arguments that IPR protection strengthens firms’ incentives to innovate and that private sector firms are more sensitive to IPR protection than SOEs. Received June 17, 2015; editorial decision November 23, 2016 by Editor Andrew Karolyi.

Financial economists have intensely debated the performance of IPOs using data after the formation of Nasdaq. This paper sheds light on this controversy by undertaking a large, out‐of‐sample study: We examine the performance for five years after listing of 3,661 U.S. IPOs from 1935 to 1972. The sample displays some underperformance when event‐time buy‐and‐hold abnormal returns are used. The underperformance disappears, however, when cumulative abnormal returns are utilized. A calendar‐time analysis shows that over the entire period, IPOs return as much as the market. The intercepts in CAPM and Fama–French regressions are insignificantly different from zero, suggesting no abnormal performance.

This paper examines the role of investments by angel groups across a heterogeneous set of 21 countries with varying entrepreneurship ecosystems. Exploiting quasi-random assignment of deals around the groups’ funding thresholds, we find a positive impact of funding on firm growth, performance, survival, and follow-on fundraising, which is independent of the level of venture activity and entrepreneur-friendliness in the country. However, the maturity of startups that apply for funding (and are ultimately funded) inversely correlates with the entrepreneurship-friendliness of the country. This may reflect self-censoring by early-stage firms that do not expect to receive funding in these environments.

This paper presents evidence of performance persistence in entrepreneurship. We show that entrepreneurs with a track record of success are much more likely to succeed than first-time entrepreneurs and those who have previously failed. In particular, they exhibit persistence in selecting the right industry and time to start new ventures. Entrepreneurs with demonstrated market timing skill are also more likely to outperform industry peers in their subsequent ventures. This is consistent with the view that if suppliers and customers perceive the entrepreneur to have market timing skill, and is therefore more likely to succeed, they will be more willing to commit resources to the firm. In this way, success breeds success and strengthens performance persistence.