I thought I just needed to know economics, finance, and econometrics?PhD student
Unfortunately, that is not enough for students aiming to publish entrepreneurial finance papers in top journals. The backbone of any successful paper is the author’s understanding/mastery of the economic, legal, political, regulatory, or cultural setting they are studying.
The course session on institutional details will evaluate major papers with the following question in mind:
What major institutional setting do I need to understand to successfully replicate this paper or understand the economic phenomenon tested?’
This class component is motivated by what drives publication success in the entrepreneurial finance literature: researchers must have a deep understanding of the institutional setting, actor (e.g., investor) norms, regulations, laws, and available datasets. For example, interpreting or expanding the Levine and Rubenstein paper “”Smart and illicit. Who becomes an entrepreneur, and do they earn more?” (QJE) demands you understand if and how firms incorporate equity compensation structures and the multiple forms of entrepreneurship. Many of these details end up in a published paper’s appendix, but they were critical to tying datasets together or defending identification strategies.
Mastery of institutional details and settings provides many benefits for the research process and paper writing:
- where to find data (or where not to look)
- finding and evaluating potential natural experiments
- defending a choice of proxy or modeling assumption
- ability to convey a paper’s identifying variation
- mastery of the main set of mechanisms and omitted variables in observational studies
- framework when building field experiments
What is an "institutional detail"?
For this course, an institutional detail is a feature or characteristic of the agents or setting being studied (that is vague!) that is not necessarily a complex economic or financial concept. It is easiest to see what we mean through questions:
- What are the disclosure rules for entrepreneurial firms raising private equity?
- What are the steps required for a potential entrepreneur to incorporate a firm?
- What happens when an individual uses personal credit for a business and defaults?
- What happens to venture capital investors after year 5 of their fund?
- What types of loans and securities can traditional banks offer to businesses?
- What are the steps to patent a new invention?
The list of details (growing list)
Here we will list the institutional details covered in the class. Stay tuned.