Thesis advisor: Thomas Chemmanur / My doctoral dissertation consists of three chapters focused on topics in entrepreneurial finance and corporate innovation. In the first chapter, I analyze secondary market patent transactions from public assignors (seller firms) to assignees (buyer firms). I show that firms with higher innovation productivity (more able to innovate) but with lower production efficiency (less able to commercialize) are more likely to sell patents distant from their operations. Using a linked assignor-assignee dataset, I find that patents technologically closer to buyer than to seller firms are more likely to be sold in a patent transaction, implying gains from trading patents. I document that, in the three years following patent transactions, seller firms experience a positive and statistically significant improvement in their ROA and operating profitability. I find that the improvement in ROA and operating profitability is concentrated in seller firms which increase their R&D focus after patent transactions, suggesting that an increase in innovation focus is one of the channels driving these results. Consistent with this channel, I find that inventors who are either newly hired by or remaining in assignor firms over the three years subsequent to patent transactions have technological expertise more similar to those of assignor firms. In the second chapter, co-authored with Xi Chen, we study how venture capitalists (VCs) create value in the product market for the entrepreneurial firms backed by them. By constructing a novel dataset based on Nielsen Retail Scanner and VentureXpert, we document that, compared to non-VC-backed firms, VC-backed startups have more than doubled their sales and seized more nationwide market share in the five years following the first VC investment. A further decomposition indicates that VC-backed firms achieve the growth in sales and market share by lowering their product prices. In addition, subsequent to the first VC investment, VC-backed firms enlarge their product portfolios by introducing new products and establishing new product lines, and they expand their products to more stores and geographic locations. Using the limited partner return as an instrument for the supply of VC financing, we show that the above effects are causal. We document heterogeneous value creation effects of VC financing for firms with different market share and for firms with different geographic proximity to the lead VC investors. This suggests that, apart from providing capital, VCs also add value to startups by directing their marketing strategy and monitoring their operations. In the third chapter, co-authored with Thomas Chemmanur, Jiajie Xu, and Xiang Zheng, we analyze the effect of the composition of venture capital (VC) syndicates on value creation to the entrepreneurial firms they invest in. We hypothesize that VCs may learn about each other’s skills at value creation when they co-invest together in entrepreneurial firms, allowing for more efficient value creation when they co-invest in subsequent syndicates. Further, if VCs view syndication as a repeated game, this may generate incentives to co-operate to a greater extent with each other when investing together in a syndicate, reducing the probability of conflicts among VCs. We empirically analyze the implications of these hypotheses and find the following. First, prior collaboration between a lead VC and any of the VCs in a syndicate leads to greater short-term value creation, as evidenced by greater sales growth, employment growth, probability of patented innovation, and the quality of innovations generated during the three years subsequent to VC syndicate investment. Second, prior collaboration between the lead VC and at least one of the syndicate members leads to greater long-term value creation, as evidenced by the higher probability of a successful exit (IPO or acquisition). Third, if the prior collaboration is very successful (leading to an IPO exit resulting from the previous collaboration), then there is even greater value creation by the VC syndicate compared to the case where the prior collaboration was less successful. Finally, consistent with prior collaboration allowing VCs to learn about each other’s value creation skills and reducing potential conflicts among the VCs forming a syndicate, syndicates with prior collaboration between the lead VC and at least one syndicate member are characterized by more uniform syndicate compositions across financing rounds. / Thesis (PhD) — Boston College, 2023. / Submitted to: Boston College. Carroll School of Management. / Discipline: Finance.

Initial Coin Offerings (ICOs) came into worldwide attention in 2018, when over $11.6 billion flowed through them. The CME Group launched Bitcoin futures contracts in December 2017, giving large funds their first regulated exposure to digital assets. As digital assets move towards the mainstream of finance, institutional investors have followed. This study comparatively analyzes Hedge Fund investment in digital assets against that of other institutional investment firm types (Private Equity and Venture Capital) by analyzing their crypto holdings and rebuilding an equally weighted portfolio for each fund. Under these conditions, the study succeeds in finding significant differences between hedge fund results in the sample and those of private equity/venture capital firms. Specifically, this study shows through the composite portfolios built that digital asset investments made by hedge funds generate a much higher return than that of private equity and venture capital firms. Average hedge fund investments have much higher trading volumes and market capitalizations than those made by private equity and venture capital firms, suggesting that PE and VC firms are taking higher risks by investing in new and little-known crypto projects. The results of this study signal that the hedge fund business model is much better suited for the high-risk, high-volatility cryptocurrency market than strategies employed by venture capital and private equity firms.

Previous academic literature examining the performance of private equity funds has documented that the average private equity fund has failed to outperform public equity markets. This underperformance coupled with a greater risk-return trade-off has failed to discourage investment in private equity markets. In fact, private equity firms have enjoyed record amounts of fund raising over the past several years. This phenomenon has been characterized as a puzzle and its investigation within the academic literature has only just begun. Using a unique and current data set covering private equity returns and their underlying cash flows, we examine performance measurements of private equity funds in the context of their relationships with one another and with public markets; as well as, examine the characteristics of the funds and their managers that drive these relationships. Our findings suggest that private equity investors are partially motivated by misinterpreted performance measurements and that this misinterpretation is compounded by fund reported residual values. These findings have important policy implications for both private equity fund managers and investors.

Crowdfunded marketplaces have recently emerged as a novel avenue for entrepreneurs to raise capital in support of innovative ideas and ventures. In these markets, any individual can propose a project, and interested others can contribute their funds to support it. The economic potential of these markets has recently become apparent and, as a result they have begun gaining significant attention from legislators and regulators, who see crowdfunding as a possible solution to the economic woes currently facing the country. However, the behavior of participants in these marketplaces, a key factor that must be accounted for in any effort to formulate policy or regulation, or to identify appropriate design practices, remains poorly understood, primarily due to the many novelties of crowdfunding. Bearing in mind the need to ensure crowdfunding's sustainability as an industry, the formulation of policy and regulation, as well as best practices for participants, I report on three empirical studies that seek to identify and quantify a variety of important aspects of, and influences upon, participant behavior in crowdfunded markets. These three studies, presented as separate essays herein, i) explore the influence upon subsequent contributors from social information about prior others' actions, ii) examine the frictions that arise due to cultural differences between and amongst users, and iii) assess crowdfunders' use of information-hiding mechanisms, and the subsequent impact on later contributors in the market. In regard to each, I discuss the relevant theory, the methodology, data sources, results and implications. I conclude by highlighting the contributions of my work, and possible avenues for future research. / Business Administration/Management Information Systems

SMEs are considered as the best possible vehicle to reduce the unemployment rate and increase economic participation in the country, specifically for historically disadvantaged people. Due to, among other things, the lack of small business management skills, the potential of SMEs cannot be fully realised. From the study it was found that one of the major reasons why SMEs fail to secure loans is a lack of management accounting skills. This lack of management accounting skills is due to a lack of mentors, training and business education. The study has identified a number of management accounting skills which most of the venture capital providers consider when they evaluate applications for loans. From empirical survey it was considered that budgeting, cash flow management and product costing were considered as imperative by most venture capital providers. / Management Accounting / (M. Com.)

Studiens syfte: Denna studie har som syfte att undersöka hur svenska venture capital aktörer minimerar asymmetrisk information i samarbetsprocessen med entreprenören. Metod: Studien är av fallstudiedesign med kvalitativ ansats där semistrukturerade intervjuer samt enkät med slutna frågor har använts för att samla in data. Empiri: Det empiriska materialet visar hur tre svenska venture capital aktörer noggrant och effektivt väljer investeringsobjekt och sedan arbetar aktivt för att dessa bolag ska bli så bra som möjligt. Slutsats: Studien visar att svenska venture capital aktörer använder sig av en kombination av olika verktyg och att bygga förtroende mellan de olika parterna för att minimera risken med asymmetrisk information. / Purpose: The aim of this study is to examine how the Swedish venture capital operators minimize the asymmetric information that may occur during an investment process. Method: This study has a case study design using a qualitative approach in which semi- structured interviews and a questionnaire with closed-end questions were used to collect data. Research: The empirical data shows how Swedish Venture Capital operators accurately and efficiently selects investment targets and then actively work for the companies they invest in. Conclusion: The main result of this investigation is that Swedish venture capital operators use a combination of different tools and trust to minimize the risk of asymmetric information.

[pt] Esta dissertação teve como objetivo verificar se a presença de gestores de Fundos de Venture Capital influencia a curva de crescimento de empresas inovadoras, baseado na análise da carteira do Programa INOVAR da Finep – Inovação e Pesquisa. Para tanto, foi elaborado um questionário e enviado para 73 empresas que faziam parte da carteira do Programa INOVAR no final de 2013, das quais 54 (74 porcento) responderam à pesquisa. O questionário procurou avaliar três dimensões principais: Resultados Financeiros, Governança Corporativa e Inovação, além de outros aspectos de características mais gerais, como diferencial competitivo das empresas e aspectos qualitativos da atuação dos gestores no dia-a-dia destas. Em 2013 as empresas pesquisadas apresentaram um faturamento bruto agregado da ordem de 7,870 bilhões de reais, e um lucro líquido de 419 milhões de reais. Os fundos tinham uma participação média de 29,2 por cento do capital social nessas companhias. No que concerne à inovação, 83 por cento das empresas declararam ter inserido produto ou serviço novo no mercado nacional, e 4 por cento afirmaram ter inovado no mercado mundial. Além dos aspectos já mencionados, a maioria dos empreendedores (70 por cento) avalia que o ingresso do fundo em suas empresas promoveu mudanças significativas em seus processos de gestão, cujos efeitos permanecerão mesmo após a saída do fundo. / [en] This study aims to investigate whether the presence of Venture Capital funds managers influence the growth curve of innovative companies based on an analysis of Finep - Innovation and Research- INOVAR Program portfolio companies. For this purpose, a questionnaire was developed and sent to 73 companies that were part of the INOVAR Program portfolio at the end of 2013, and 54 (74 percent) of them responded to the survey. The questionnaire sought to assess three main dimensions: Financial Results, Corporate Governance and Innovation, and other aspects of general characteristics. In 2013 the surveyed companies had aggregated gross revenues of 7,870 billion reais and a net profit of 419 million reais. The funds had an average share of 29.2 per cent of the equity in these companies. With regard to innovation, 83 per cent of the companies reported having inserted new product or service in the domestic market, while 4 per cent said they brought innovation to the world market. Besides the aspects mentioned above, the majority of entrepreneurs (70 per cent) estimates that the contribution of the funds to their companies promoted significant changes in their management processes, whose effects will remain after the exit of the funds.

[pt] Fundos de Private Equity e Venture Capital (PE/VC) investem, principalmente, em pequenas e médias empresas de capital fechado. Sua atuação junto a essas companhias mostra grande ativismo, muitas vezes com a implantação de boas práticas de governança e criação de valor nos processos, com o objetivo de proporcionar rápido crescimento e efetuar o desinvestimento com elevada rentabilidade. O objetivo deste trabalho é investigar a relação entre a participação societária de fundos de PE/VC antes do IPO e o desempenho de longo prazo das ações das companhias após a abertura de capital. Para tanto, as empresas foram divididas por setor econômico de atuação e duas análises foram realizadas: buy and hold e retorno anormal acumulado (CAR). O primeiro estudo apresenta resultados variados em cada setor. O grupo de empresas com presença prévia de PE/VC teve melhor desempenho somente nos setores de Consumo, Exploração Imobiliária, Saúde e Utilidade Pública. A segunda análise envolveu a comparação dos retornos das empresas com benchmarks setoriais e as regressões efetuadas apontaram que a participação de fundos de PE/VC influencia o CAR somente no período de seis meses após o IPO. Não foram encontradas evidências significativas entre a permanência desses fundos na estrutura societária das companhias e seus retornos de longo prazo. / [en] Private Equity and Venture Capital (PE/VC) funds invest primarily in small and medium private companies. Their partnership with these firms shows great activism, often with implementation of good governance practices and value creation in processes, aiming to provide fast growth and make disinvestment with high profitability. The objective of this study is to investigate the relationship between PE/VC investment in private firms and the long-term performance of these companies shares after the IPO. Companies were divided by industry and two analyzes were performed: buy and hold and cumulative abnormal return (CAR). The first analysis shows mixed results in each industry. The group of PE/VC-backed firms performed better only in the sectors of Consumption, Real Estate, Healthcare and Utilities. The second analysis involved a comparison of companies returns with industry benchmarks and the regressions performed showed that PE/VC investment has a positive significant relation with CAR six months after the IPO. No significant evidence of this relation was found when these funds held their position or part of that in the corporate structure of the companies.

Venture Capital can play a key role for our future by placing their capital in sustainable investments. They have the capacity to fuel new ventures, sprung from ideas on how to solve the sustainability challenges we face today. In this paper we research the drivers and barriers for sustainable venture capital investment decisions. Our findings show that increased knowledge on sustainability issues is affecting the general public opinion, policies and governance and the way we choose to live, consume and do business. This in turn increases the market potential for sustainable businesses. Therefore, sustainable investments are more and more considered as a good investment, not only in regard to social and ecological aspects but also financial returns. A model with our findings showing the drivers and barriers for sustainable venture capital investment decisions will be presented aiming encourage and push toward a more sustainable future.

by Lam Shiu-wing. / Bibliography: leaves 56-57 / Thesis (M.B.A.)--Chinese University of Hong Kong, 1985