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 NEW VENTURE INVESTMENT:
CHOICES AND CONSEQUENCES
This Page Intentionally Left Blank
 NEW VENTURE INVESTMENT:
CHOICES AND CONSEQUENCES

Edited by

Ari Ginsberg
Stern School of Business, New York University,
NY 10012-4211, USA
and
Iftekhar Hasan
Lally School of Management,
Rensselaer Polytechnic Institute, NY 12180-3590, USA

2003

Amsterdam — Boston — Heidelberg — London — New York — Oxford — Paris

San Diego — San Francisco — Singapore — Sydney — Tokyo
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 List of contributors

Ilgaz Arikan Pieter Knauff

School of Management, Boston University School of Management, University of
Amsterdam
Michele Bagella
Facoltá di Economia, Universitá Tor Vergata, Yarom Landskroner
Roma Stern School of Business, New York University

Leonardo Becchetti Dimi Leshchinskii

Facoltá di Economia, Universitá Tor Vergata, Finance Department, Groupe HEC
Roma Jeffrey G. MacIntosh
Fabio Bertoni Faculty of Law, University of Toronto
Dipartimento di Ingegneria Gestionale, Barbara Martini
Politecnico di Milano Facoltá di Economia, Universitá Tor Vergata,
Roma
Tom Berglund
Department of Finance, Swedish School Jacob Paroush
of Economics Department of Economics, Bar-Ilan University
Douglas J. Cumming Peter Roosenboom
School of Business, University of Alberta Department of Finance, Erasmus University
Bill Francis Annika Sandström
College of Business Administration, University Department of Finance, Swedish School of
of South Florida Economics

Ari Ginsberg Zur Shapira

Stern School of Business, New York University Stern School of Business, New York University

Giancarlo Giudici Sridhar Seshadri

Facoltá di Economia, Universitá Tor Vergata, Stern School of Business, New York University
Roma Richard Sylla
Iftekhar Hasan Stern School of Business, New York University
Lally School of Management, Rensselaer Christopher L. Tucci
Polytechnic Institute Swiss Federal Institute of Technology, EPFL-
Chengru Hu CDH-ILEMT-CSI
School of Management, Rutgers University Tjalling van der Goot
Edvard Johansson Department of Finance, University of
The Research Institute of the Finnish Economy, Amsterdam
Helsinki, Finland Joakim Westerholm
School of Business, University of Sydney
This Page Intentionally Left Blank
 Contents

List of Contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix

Chapter 1 Asymmetry of Information and of Beliefs in Venture Capital . . . . . . . . . . . . . . . . . . 1

Yarom Landskroner and Jacob Paroush
Chapter 2 Venture Capital Investing and the "Calcutta Auction" . . . . . . . . . . . . . . . . . . . . . . . . . 19
Sridhar Seshadri, Zur Shapira and Christopher L. Tucci
Chapter 3 The Entrepreneur’s Initial Contact with a Venture Capitalist. Why Good
Projects May Choose to Wait . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Tom Burglund and Edvard Johansson
Chapter 4 How Should Entrepreneurs Choose Their Investors? . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Dima Leshchinskii
Chapter 5 In Quest for Equity Partners: The Determinants of the Going Public-Large
Blockholder Choice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Michele Bagella, Leonardo Becchetti and Barbara Martini
Chapter 6 Exit Decisions of Entrepreneurial Firms: IPOs versus M&As . . . . . . . . . . . . . . . . . . 103
Ilgaz Arikan
Chapter 7 Venture Capital in Financial Systems: Historical and Modern Perspectives . . . . . . 153
Richard Sylla
Chapter 8 Canadian Labour Sponsored Venture Capital Corporations: Bain or Boon? . . . . . . 169
Douglas J. Cumming and Jeffrey G. MacIntosh
Chapter 9 ‘New’ Stock Markets in Europe: A ‘New’ Exit for Venture Capital Investments . 201
Fabio Bertoni and Giancarlo Giudici
Chapter 10 Post-Issue Performance of Hot IPOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
Annika Sandström and Joakim Westerholm
Chapter 11 Is Accounting Information Relevant to Valuing European Internet IPOs?. . . . . . . . 257
Pieter Knauff, Peter Roosenboom and Tjalling van der Goot
Chapter 12 Deliberate Underpricing and Price Support: Venture Backed and Nonventured
backed IPOs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281
Bill Francis, Iftekhar Hasan and Chengru Hu
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 New Venture Investment: Choices and
Consequences

New venture founders and their sponsors seek to create economic value by finding
and commercializing new and better ways of doing things. Their common goal,
which also defines the purpose of the entrepreneurial process itself, requires a solid
grasp of the choices involved in attempting to create economic value under highly
uncertain conditions and of the key decision making elements that influence these
choices. It also requires an understanding of the consequences of new venture
investment and of the various contextual factors that influence investment decisions
and outcomes.
In seeking to detect generalities and to make abstracted sense of decisions faced
by entrepreneurs and new venture investors, academics commonly classify the
problem as a special case of some theory or model that originates in the specific
discipline- or field-based knowledge they possess (Davidsson, 2002). The explana-
tions that academic researchers provide and the predictions they make are therefore
likely to be framed in terms of the types of variables, theoretical perspectives,
levels of analysis, and research methodologies with which they are familiar.
To explore the intellectual underpinnings of new venture investment, we have
gathered and organized a set of twelve papers that provide scholarly analysis of
the choices involved in new venture investment as well the various contextual
factors that influence investment outcomes. To insure a more robust and hopefully
interesting scholarly treatment of such problems, we have included a broad range of
theoretical frameworks and methodological approaches. To provide an international
perspective we have also included studies of new venture investment in other
countries besides the United States. As illustrated in Exhibits 1 and 2, the first
six chapters examine the ways in which key decision making elements influence
the investment-related choices made by venture capitalists and entrepreneurs. The
second six chapters examine the ways in which various contextual factors influence
the outcomes of new venture investments.
In their chapter “Asymmetry of Information and of Beliefs in Venture Capital,”
Yoram Landskroner and Jacob Paroush analyze the interaction of a venture
capitalist and the entrepreneur during the early stages of fund raising for potential
start-ups. In focusing on the central role played by venture capital funds in the
x Ari Ginsberg and Iftekhar Hasan

financing of new entrepreneurial start-ups, the authors highlight the fact that a high
degree of uncertainty and asymmetric information exists between the entrepreneurs
and venture capitalist. Building on this supposition, Landskroner and Paroush
develop a model for analyzing the behavior of an entrepreneur and the response of a
venture capitalist in the context of a first round financing environment. Their model
shows that the entrepreneur has superior information concerning the outcome of
the venture and uses an appropriate incentive scheme to attract investment from
the venture capitalist. This scheme makes capitalists’ more optimistic about the
venture and influences their decision to supply equity and debt financing. As an
extension of their model, the authors attempt to determine the optimal amount of
external financing raised and the optimal capital structure of the firm.
In contrast to the rational modeling approach taken by economics and finance
scholars Landskroner and Paroush, operations management and decision theorists
Sridhar Seshadri, Zur Shapira and Chrisopher Tucci argue in their chapter “Venture
capital investing and the Calcutta Auction” that rational models of firm valuation
are grossly overrated. Their analysis sheds new light on previously held conceptions
regarding the rationality of VC investment decisions. After pointing out that such
factors as market myopia, technology races, herding behavior, and cash flows
are largely responsible for over-valuation, they introduce an alternative approach
that incorporates the seemingly non-rational investment behavior into a “Calcutta
auction” model. This model suggests that in considering investment under condi-
tions of high uncertainty, the behavior of investors can be explained through the
examination of specific behavioral components without resorting to traditional
irrationality arguments. The authors argue that the Calcutta auction appears to
be a good mechanism to explain markets that are characterized by uncertainty,
information asymmetry and by small number of participants as well as to explain
actual bids put up by VCs. Their analysis highlights three key assumptions: The
first is that the externalities of market development efforts affect firm valuation in
electronic markets. The second is that both irrationality, with small investments -
and rationality, with large investments – may exist in newly discovered markets.
Finally, analogous to the Calcutta auction, the total VC investment in an industry
seems to depend on two factors, the initial “value” of the undeveloped market as
well as the fraction of individual VC investment that works to develop the market for
other entrants.
Having examined the ways in which VC investment choices may be influenced
by relevant decision making models, we turn next to an examination of how the
cognitive mindsets of entrepreneurs influence the choices they make in dealing
with investment opportunities during different stages of their firm’s life cycle.
In their chapter, “The Entrepreneur’s Initial Contact with a Venture Capitalist
-Why Good Projects May Choose to Wait,” Tom Berglund and Edvard Johansson
seek to explain the absence of services by venture capitalists to client firms at early
 New Venture Investment: Choices and Consequences xi

stages of the firm’s life cycle. They observe that the complementarity of financing
and advice provide the venture capitalist with an advantage compared to firms
specialized in either of the two. They also point out that the entrepreneur is not
interested in the total value of an investment project, but rather in the part that he can
secure for himself. By being aware that a venture capitalist may find it more prof-
itable to reject the project and transfer useful parts of the idea to other clients than to
join forces with the entrepreneur, the profit-maximizing entrepreneur may find it in
her best interests to wait and develop the project herself before involving the venture
capitalist. This allows the entrepreneur to improve his bargaining position and to
secure a larger share of the expected profits of the business idea once the venture
capitalist becomes involved. The optimal length of the delaying venture financing
will be determined by the point where the marginal increase in contractibility
exactly balances the marginal deterioration in total value of the project due to
competitive pressure. Using comparative statics the authors show that the delay in
involving a venture capitalist will be longer the less rapidly the NPV deteriorates,
the more skilled is the entrepreneur, and the slower is the rate of increase in con-
tractibility. In further pointing out that the market for a venture capitalist’s services
at the start-up stage is highly prone to failure, Berglund and Johansson also predict
the likely performance outcome of the entrepreneur’s decision not to delay: Since
entrepreneurs with projects that have above average expected profitability will post-
pone their initial contact with the venture capitalist, entrepreneurs that do contact a
venture capital firm at the start-up stage will tend to have a lower, or below average,
expected profitability.
In contrast to the analysis provided by Berglund and Johansson, which focuses on
the question of timing faced by an entrepreneur dealing with a VC investor, the next
chapter “How should entrepreneurs choose their investors” by Dima Leshchinskii,
addresses the question of what type of investor to deal with in the first place. Investors
differ by their abilities to screen and monitor innovative projects, to bring aboard
alternative managers, and to practice a portfolio approach. This chapter shows
how these differences change the expected net present value of an entrepreneurial
project and determine the choice of investor by the entrepreneur. Different factors
can be critical for the project’s payoff at each particular stage of its development.
Therefore, for each stage the entrepreneur may attract investors with the highest
level of expertise in the relevant area. For example, professional angels and venture
capitalists obtain better information about a project’s potential outcomes and emerge
as providers of capital when this information is crucial. Venture capitalists and
corporate investors, sometimes including the parent companies, are the industry’s
experts who have access to a pool of professional managers. Because they can
furnish less costly managerial replacement, they should be the main source of capital
at the stage when top-quality management is the decisive factor. In contrast, VC
investment can lead to a higher probability of success, especially at the R&D phase.
xii Ari Ginsberg and Iftekhar Hasan

The last two chapters in this section take us from the questions of when and from
whom to seek new venture financing to theoretical and empirical analyses of exit
strategy choices faced by entrepreneurs who have already established their new
business.
In their chapter “In quest of equity partners: the determinants of the going public-
large blockholder choice,” Michele Bagella, Leonardo Becchetti, and Barbara
Martini present a theoretical analysis of the determinants affecting the controlling
shareholders choice between going public, remaining private, and looking for a
blockholder when they need external financing. In the model they propose, these
choices are strictly connected through a bargaining framework between controlling
shareholders and the large blockholders in which the going public choice represents
the controlling shareholders’ outside option. Another important feature of the
model is that controlling shareholders have to monitor managerial activity and
choose their optimal effort in monitoring them. Under the going public choice,
they remain residual claimants of firm profits after satisfying the reservation utility
of small shareholders and the reservation wage of the manager. For this reason,
optimal effort is proportional to the ex post property right share. In contrast, under
the block holder choice, controlling shareholder bear the costs of monitoring
managerial effort while they benefit from their effort only in proportion to their
bargaining power. A key claim of this chapter is that the main advantage of going
public for controlling shareholders is the stronger bargaining position they possess
as they face dispersed small shareholders, and the main disadvantage is that small
shareholders suffer more from informational asymmetries and are risk averse. This
suggests that the compensation they require to participate in the venture may be
too costly for controlling shareholders under high financial volatility, bullish stock
market conditions, or when the firm is not well known to them. The authors further
posit that not only is the blockholder choice socially preferred to the going public
choice in general, but the desirability of the going public choice is further reduced
in a weak institutional environment with illegal collusion under the block holder
choice, which comes at the expense of small shareholders.
The last chapter in this section - “How should an entrepreneurial firm be sold?
Auctions versus negotiations,” by Ilgaz Arikan moves us from the question of
whether and how to do an initial public offering to the choices faced by the en-
trepreneur on how to sell the new venture. Whereas economists Bagella, Becchetti,
and Martini anchor their hypotheses in agency theory models that focus on mon-
itoring costs and information asymmetries, management scholar Arikan uses the
theory of auctions and negotiations to explain the optimal choice between market
mechanisms in an entrepreneurial context. Two major markets exist for the sale of
a new venture: initial public offering (IPO) versus mergers and acquisitions (M&A)
markets. In his chapter, Arikan argues that choosing between these two market
 New Venture Investment: Choices and Consequences xiii

mechanisms rests on five factors: bargaining power, resource value, market thick-
ness, risk propensity and search costs. Using a nested logit model he tests this general
discrete choice using a sample of IPOs and M&As of privately held entrepreneurial
firms between 1975–1999. He finds that, all else being equal, entrepreneurial firms
with high bargaining power are more likely to choose negotiations (M&A) versus
auctions (IPOs). Firms that represent high private values (e.g., in high-tech indus-
tries) are more likely to be sold through auctions versus negotiations. As market
thickness increases, the likelihood of entrepreneurial firms being sold through
M&A decreases. However, this finding is reversed for firms with higher private
values. For firms with high debt ratios, the likelihood of M&A increases compared
to IPOs. The likelihood of M&A also increases as venture capital activity in
the focal industry increases.
The second section of this book examines how different types of contextual fac-
tors or characteristics affect the consequences of new venture investment. We begin
with a historical perspective of the effects of a country’s financial system on venture
capital investment activity. In his chapter “Venture Capital in Financial Systems:
Historical and Modern Perspectives,” financial historian Richard Sylla demonstrates
the influence of Schumpeter’s insights on economic development on his historical
analysis of important trends in entrepreneurship and new venture financing. In
Schumpeter’s (1934) celebrated theoretical analysis of economic development
(a synonym for modern economic growth), the partner of the entrepreneur is the
banker, and there is a strong implication that development will not occur unless both
characters are present and working effectively together. In pursuing that inference
in his own research, Sylla reaches the conclusion that the nature and effectiveness
of venture financing at any time or place in history, including the present, depends
on context. To be more specific, the nature and effectiveness of venture financing
depends on the nature and effectiveness of the overall financial system of which
venture financing is just a part, and often a minor part. In this essay he illustrates and
amplifies his contention that venture financing is financial-system-context specific.
Sylla’s analytical framework corresponds to the time-series and cross-section ap-
proaches used by econometricians in testing hypotheses and estimating parameters
of their models with economic data. His time series analysis consists of cases of
new venture financing in several eras of U.S. history. His cross sectional analysis
consists of cases of new venture financing in different parts of the world today. Each
type of evidence tends to support the argument that the nature and effectiveness of
new venture financing depends on context. There are two policy implications of this
argument, one negative and the other more positive. The negative implication is that
because new venture financing is context-specific, one cannot at all easily transfer
venture-financing practices from one context—say, a country that is a paragon of
entrepreneurship and economic growth—where those practices function well – to
xiv Ari Ginsberg and Iftekhar Hasan

another context, namely, a context in which the overall financial system is different
from, and possibly less developed than the financial system of the paragon country.
A more positive policy implication is that, in seeking to improve financial systems
throughout the world, the efforts of national and international development agencies,
the latter including prominently the World Bank and the IMF, are, as the British
say, spot on. If these agencies achieve the hoped-for successes, then new venture
financing possibilities should proceed apace with financial development. Of course,
countries themselves need to take the lead in this; there is only so much the external
development agencies can do. Both, however, can learn much about designing
better financial systems and avoiding worse ones from studying financial history.
Having examined how VC investment behavior may be influenced by the way in
which a country’s financial system is designed, we turn next to a specific case of
government intervention to influence the performance of labor-sponsored venture
capital corporations in Canada.
In their chapter “Canadian Labor-Sponsored Venture Capital Corporations:
Bane or Boon?” Douglas J. Cumming and Jeffrey G. MacIntosh examine a govern-
mental assistance program run by various Canadian governments, both provincial
and federal, that takes the form of indirect subsidies to technology enterprises via
tax subsidization of the investors in venture capital funds called “labour-sponsored
venture capital corporations,” or LSVCCs. The mechanism for inducing investment
in LSVCCs has been the provision of generous tax subsidies to investors, consisting
of a combination of tax credits and deductibility of the investment from income.
Their study suggests that the tax expenditures that underlie the LSVCC programs do
not represent a useful expenditure of public monies, and that the various government
sponsors should seriously consider abandoning the LSVCC programs. They begin
with a sketch of the Canadian venture capital industry, which is followed by a
description of organizational structure of the LSVCCs and of the various statutory
constraints that they operate under. Then they briefly compare this structure and
these constraints with those applicable to the LSVCCs’ private sector counterparts
and suggest that the LSVCC structure is highly inefficient and likely to lead to a high
level of agency costs vis-à-vis funds investors. Consistent with the relevant research
on the topic the authors report a lower LSVCC performance. While the fixed and
variable components of fund manager compensation (the management expense
ratio, or MER, and the carried interest, respectively) are comparable to those of
private funds, LSVCCs have performed very poorly compared to both Canadian
and U.S. private funds, and various Canadian and U.S. market indices. Other
research suggests that they have even underperformed short-term bank deposits
and treasury bills. While this suggests that the tax expenditures that underlie the
LSVCC programs have not been wisely spent, many have claimed that the LSVCC
programs are justifiable even in the face of poor returns, on the basis that they have
significantly augmented the pool of Canadian venture capital investments. However,
 New Venture Investment: Choices and Consequences xv

the authors point to evidence in related research that strongly suggests that LSVCCs
have crowded out other types of venture capital thereby leading to an overall
reduction in the aggregate pool of Canadian venture capital. They conclude that the
Canadian LSVCC program has been a costly failure for its government sponsors.
In the remaining chapters of this section, we shift from an examination of
country level factors to an examination of the ways in which market and firm-level
contextual factors influence the nature and duration of VC investment as well as
IPO performance outcomes.
In their chapter “New’ Stock Markets in Europe: a ‘New’ Exit for Venture Capital
Investments,” Fabio Bertoni and Giancarlo Giudici explore the role of venture
capitalists in new market (NM) companies before, during and after the listing and
also attempt to identify differences between venture-backed IPOs versus other com-
panies, and European VC-backed IPOs versus their US counterparts. Analyzing a
sample of 575 firms listed on European ‘New Markets’ from 1996 to 2001, they find
that VC-backed IPOs are significantly smaller than other IPOs. However, although
they exhibit lower sales and earnings and raise less equity capital, they are not
significantly younger and more underpriced. In comparing the European experience
with the US experience during the 1996 to 2000 period, Bertoni and Giudici high-
light several similarities, e.g., NM companies are not significantly younger than US
companies and the initial mean underpricing is surprisingly similar; they also point
out some interesting differences, e.g. NM companies are smaller and less profitable,
insider ownership is concentrated in the hands of CEOs, and the presence of VCs
is less frequent and significant. Their analysis suggests a number of interesting
findings: First, VCs tended to retain shares in companies in which their marginal
contribution to the creation of value also might be significant after the listing (that
is, in young companies with a scarce capability to generate cash, characterized by
further growth opportunities). Second, VCs tended to sell shares of the smallest
companies in their portfolio. Last, VCs took advantage of the market euphoria
towards technology stocks. These findings challenge the traditional view that going
public coincides with private equity investors’ exit from the firm and strengthens the
hypothesis that the listing on European NMs is not considered a stage subsequent
to private equity financing, but a further relevant ‘public’ source of funds alongside
venture capital. The role of private VCs in NMs is perceived as strategic even
after the IPO: their permanence provides a ‘certification effect’ strengthened by
lock-up provisions.
In their chapter “Post-Issue Performance of Hot IPOs,” Annika Sandström and
Joakim Westerholm investigate the operating performance of Finnish initial public
offerings during the years 1984–2000. Their study, which reports, an average
excess return of 27% at the end of the first day trading in the Helsinki Stock
Exchange, provides new evidence on the performance of Finnish IPOs during a
period when the market experienced a relatively high number of companies going
xvi Ari Ginsberg and Iftekhar Hasan

public. Analyzing the changes in operating performance over a five year period,
Sandström and Westerholm found an initial high level of underpricing on the first
day of offering followed by a significant and continuous decrease of performance
as portrayed by a variety of accounting ratios over the next fine year period.
The experience of high underpricing on the first day of offerings followed by a
continuous decline of performance during the subsequent five years is consistent
with most prior literature of IPO performance in other countries.
In their chapter “Is Accounting Information Relevant to ValuingEur opean Internet
IPOs?” Pieter Knauff, Peter Roosenboom, and Tjalling van der Goot investigate the
relevance of accounting information to valuing European Internet IPOs during the
years 1998–2000 both before and after the Internet bubble burst in April 2000.
Using market value as the proxy for firm value, they study the relationship between
accounting variables and IPOs and find results that are contrary to the widely held
belief that accounting information is of limited use when valuing the IPO shares of
Internet companies. The authors provide a number of contributions to the literature
by conducting empirical research on the relevance of accounting information for
valuation of Internet firms in the European markets. The paper examines the value
drivers underlying Internet IPOs from two perspectives: the offer price and the stock
price at the end of the first trading day. The authors also extend their analysis to
non-accounting information that is available at the time of the IPO. Consistent with
previous findings in the U.S. markets, they find that free float (i.e., the percentage
of shares being sold in the IPO) is negatively related to market value. However, they
found no significant positive relationship between market value and the percentage of
post-IPO ownership of the largest shareholder. Based on their analysis, they conclude
that market value is negatively related to earnings in the Internet bubble period before
April 2000 and that the free float is more value relevant in the bubble period.
In the last chapter in this section “Deliberate Underpricing and Price Support:
Venture Backed and Non-ventured backed IPOs,” Bill B. Francis, Iftekhar Hasan,
and Chengru Hu examine the premarket underpricing phenomenon within a group
of venture-backed and a group of non venture-backed initial public offerings

Exhibit 1. Theoretical relationships examined in chapters 1–6

 New Venture Investment: Choices and Consequences xvii

Exhibit 2. Theoretical relationships examined in chapters 7–12

(IPOs). Using an economic frontier analysis, their chapter attempts to address

two issues. First, it investigates whether the difference in underpricing between
VC-backed IPOs and non VC-backed IPOs is due to deliberate underpricing in the
pre-market or to other factors such as underwriter price support in the after market.
Second, we examine the role deliberate underpricing plays in the IPO process as it
relates to initial day returns and price stabilization. The evidence indicates that in
contrast with prior studies, VC-backed IPOs tend to be more underpriced than non
VC-backed IPOs and the degree of pre-market underpricing is significantly higher
for VC-backed IPOs relative to their non-VC counter part. The results suggest that
the documented difference in underpricing in the literature between VC-backed
and non VC-backed IPOs cannot be fully attributed to post-market phenomena.
Rather, a significant portion may be due to deliberate underpricing as a means of
compensating investors. In addition, the evidence indicate that for both VC- and
non VC-backed IPOs deliberate underpricing in the pre-market leads to a higher
probability of price stabilization in the after-market; and in that scenario, there is
also a higher likelihood of price support for non VC-backed IPOs.

REFERENCES

Davidsson, Per (2002). What Entrepreneurship Research can do for Business and Policy
Practice, International Journal of Entrepreneurship Education, 1(1), 1–20.
Schumpeter, Joseph, (1934). The Theory of Economic Development, Cambridge: Harvard
University Press.

Editors
Ari Ginsberg and Iftekhar Hasan
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