Working Papers

Academic Freedom and Innovation


(with D. Audretsch, C. Fisch, C. Franzoni, S. Vismara)

Abstract: The first-ever article published in Research Policy was Casimir’s (1971) advocacy of academic freedom in the light of the industry’s increasing influence on research in universities. Half a centure later, the literature attests to the dearth of work on the role of academic freedom for innovation. To fill this gap, we employ instrumental variable techniques to identify the impact of academic freedom on the quantity (patent applications) and quality (patent citations) of innovation output at the country level. The empirical evidence suggests that improving academic freedom by one standard deviation increases patent applications and forward citations by at least 37% and 29%, respectively. The results hold in a representative sample of 157 countries over the 1900-2015 period, with a sample/population coverage ratio of 92%. This research note also is an alarming plea to policymakers: Global academic freedom has declined over the past decade for the first time over the last century. Our estimates suggest that the decline of academic freedom has resulted in a global loss quantifiable with at least 4.0% fewer patents filed and 5.9% fewer patent citations.

The Economic Costs of the Russia-Ukraine War: A Synthetic Control Study of (Lost) Entrepreneurship


(with D. Audretsch, H. Motuzenko, S. Vismara)

Abstract: This synthetic control study quantifies the economic costs of the Russo-Ukrainian war in terms of foregone entrepreneurial activity in both countries since the invasion of Crimea in 2014. Relative to its synthetic counterfactual, Ukraine’s number of self-employed dropped by 675,000, corresponding to a relative loss of 20%. The number of Ukrainian SMEs temporarily dropped by 71,000 (14%) and recovered within five years of the conflict. In contrast, Russia had lost more than 1.4 million SMEs (42%) five years into the conflict. The disappearance of Russian SMEs is driven by both fewer new businesses created and more existing business closures.

Decentralized Finance (DeFi) Markets for Startups: Search Frictions, Intermediation, and Efficiency


Abstract: How efficient is Decentralized Finance (DeFi)? To answer this question, we study the efficiency and the role of intermediation in a large DeFi segment, namely, the market for Initial Coin Offerings (ICOs). In particular, we advance a search-related theory of DeFi, in which search frictions partly offset the efficiency gains from reduced transaction costs thanks to blockchain technology and smart contracts. The intensity of search, i.e. the process of identifying valuable projects, is increasing in market granularity. Blockchain technology increases market granularity through lower entry barriers. Lower-end entrants, however, increase aggregate search intensity but lack search skills. The resulting search-related inefficiency creates a niche for DeFi intermediaries. Consistent with this theory, our findings suggest that DeFi intermediaries reduce search frictions and extract economic rents for their services. Relative to the Walrasian equilibrium, DeFi is relatively inefficient, and search frictions reduce the welfare for society almost by half. The evidence indicates that perfectly decentralized finance markets would not be optimal for society.

Emotions in New Venture Teams: Affects as Signals, Emotional Diversity, and Valuation Effects in Initial Coin Offerings (ICOs)


Reject & Resubmit at Strategic Entrepreneurship Journal

Abstract: New Venture Teams’ (NVTs’) collective emotions impact startup valuations through their intensity and diversity. I identify NVTs’ affective traits with artificial emotional intelligence by tracking 2,520 individuals across 165 NVTs during their Initial Coin Offerings (ICOs). The level of NVTs’ negative affects correlates with lower valuations, while within-NVT emotional diversity has a value-increasing effect. Intuitively, negative affects are associated with traits that may be prejudicial in dynamic entrepreneurial markets, but could be valuable if balanced by opposite traits in emotionally diverse NVTs. Moderated mediation analyses suggest that NVT affects have pronounced direct valuation effects. Overall, I extend the focus of the affective entrepreneurship literature from the entrepreneur to the team level, introduce the concept of emotional diversity, and explore the role of emotions in entrepreneurial finance.

Decentralized Finance, Crypto Funds, and Value Creation in Tokenized Firms


(with D. Cumming, N. Dombrowski, W. Drobetz)

Duke Law School coverage
Columbia Law School coverage

Abstract: Crypto Funds (CFs) represent a novel investor type in entrepreneurial finance. CFs intermediate Decentralized Finance (DeFi) markets by pooling contributions from crowd-investors and investing in tokenized startups, combining sophisticated venture- and hedge-style investment strategies. We compile a unique dataset combining token-based crowdfunding (or Initial Coin Offerings, ICOs) data with proprietary performance data of CFs. CF-backed startup ventures obtain higher ICO valuations, outperform their peers in the long run, and benefit from token price appreciation around CF investment disclosure in the secondary market. Moreover, CFs beat the market by roughly 2.5 percent per month. Their outperformance is persistent, suggesting that CFs deliver abnormal returns because of skill, rather than luck. These performance effects for CFs and CF-backed startups are driven by the investor network centrality. Overall, our study paves the way for research on what some refer to as the >>crypto fund revolution<< in entrepreneurial finance.

The Discount for Lack of Marketability in Private Investments in Public Equity


Work in progress (with A. Bernardo, I. Welch)

Abstract: Our paper estimates that shares in Private Investments in Public Equity (PIPEs) offered a discount of 3-4% for each year during which these shares could not be resold. Our estimates make use of the duration of the resale restriction and information about the effects of a regulatory change. In 2008, the SEC amended Rule~144 to shorten the default statutory holding period. Our estimates are smaller than previous estimates and robust to various controls and endogeneity concerns. The discount can be twice as large in offerings in which marketability is a greater concern.