Essays in Entrepreneurship and Finance

Abstract

In this dissertation, I study three economic issues in the field of entrepreneurship and a fourth that looks at the network structure of financial markets. Chapter 1, titled "Patenting and Nascent Firm Performance", examines how patents interact with nascent firm outcomes. The primary motivation follows a puzzle present in the data and discussed in the literature. Patents are prized possessions for business owners but the value that they confer is dubious. In this sample, patenting firms have no better survival rates and have significantly worse profit outcomes. A Oaxaca decomposition demonstrates the reason for this lies with patents' attraction of equity financing. The burden of the equity relationship proves to be a strain on the young firms. Chapter 2, titled "Signal vs Appropriation Value in Patenting" provides insight into the causal connection between patents and equity financing. This chapter also weighs in on the source of the equity firms' attraction to patents. Controlling for unobservable influences via fixed effects regression, the value measured by the coefficient on patent, demonstrates the appropriative value of the patent, rather than the signal value. Further examination reveals that equity firms are very sensitive to the legal status of the firm, eschewing general partnerships. Chapter 3, titled "Peer Effects in Entrepreneurship", studies gender differences in firm financing as a function of response to peers. This research borrows from the social interaction modeling pioneered by Charles Manski by adopting methods to include peer variables. The main finding is that males are positively and significantly affected by peer financing levels but females are not. This result is robust to industry, experience, credit risk, and other financing sources. Chapter 4, "Network Analysis of the S\&P 500", examines the financial market as a network. The literature takes two approaches to performing this analysis but no study has compared the two approaches. This chapter is the first study to compare them and provide insight as to which provides the more descriptive model. The threshold correlation approach provides much more useful results for any kind of analysis involving market connectedness and shock transition dynamics.