Course Summary

“Research in Entrepreneurial Finance” explores academic research covering the formation, financing, growth, and outcomes of entrepreneurial firms. These firms differ from those traditionally studied in finance and economics. Such differences include ownership structure (private vs. public), size, the severity of financing constraints, and the role of financial intermediaries. This course aims to understand the sources and implications of these differences. The course will not follow the traditional approach that emphasizes literature reviews. Much like one must understand how bank balance sheets work before embarking on a banking paper or how mutual fund disclosures are regulated before studying ETFs, successful entrepreneurial finance researchers must understand various rules, norms, and other institutional details. Thus, most lectures will focus on the background material behind the literature’s major results, such as regulations, data sources, actor norms, and industry trends.

Goals and Teaching Methodology

Each course module/week focuses on two to three academic papers with two goals in mind. First, students will learn about the major research questions, facts, and methods used in the literature. Papers will be both empirical and theoretical, with an emphasis on the former. Second, the course will include background or institutional setting lectures. Here, we will evaluate each week’s major paper with the following question in mind: “What major institutional setting do I need to understand to replicate this paper or understand the economic phenomenon tested?”

Students will be taught material so that they are prepared for detailed institutional detail questions about their research setting. 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. There are many benefits to mastering institutional details.

Course Structure

Each week of the six-week term will focus on 2-3 related foundational papers associated with its research question. The first meeting will cover the motivation, research question, results, and implications of the research topic. This will be followed by an in-depth discussion of the institutional background, database, historical event, or market setting that must be understood to interpret the results using the 2-3 papers as a framework.

Week 1: Entrepreneurial firm formation and organizational form

Week 2: Capital constraints

Week 3: Capital sources: entrepreneur wealth and banks

Week 4: Financial intermediaries

Week 5: Financial intermediaries continued; capital structure

Week 6: Capital markets, exits and investor returns