Abstract

http://ssrn.com/abstract=899100
 
 

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Was There Too Little Entry During the Dot Com Era?


Brent D. Goldfarb


University of Maryland - Robert H. Smith School of Business

David Kirsch


University of Maryland

David A. Miller


University of California, San Diego - Department of Economics

April 24, 2006

Robert H. Smith School Research Paper No. RHS 06-029

Abstract:     
We present four stylized facts about the Dot Com Era: (1) there was a widespread belief in a Get Big Fast business strategy; (2) the increase and decrease in public and private equity investment was most prominent in the internet and information technology sectors; (3) the survival rate of dot com firms is on par or higher than other emerging industries; and (4) firm survival is independent of private equity funding. To connect these findings we offer a herding model that accommodates a divergence between the information and incentives of venture capitalists and their investors. A Get Big Fast belief cascade may have led to overly focused investment in too few internet startups and, as a result, too little entry.

Number of Pages in PDF File: 59

Keywords: Dot Com, Herding, Cascades, Venture Capital, Expectations, Speculation

JEL Classification: G14, G24, D83, D84, L80, M13, N80, 030

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Date posted: December 20, 2005  

Suggested Citation

Goldfarb, Brent D. and Kirsch, David and Miller, David A., Was There Too Little Entry During the Dot Com Era? (April 24, 2006). Robert H. Smith School Research Paper No. RHS 06-029. Available at SSRN: http://ssrn.com/abstract=899100 or http://dx.doi.org/10.2139/ssrn.899100

Contact Information

Brent D. Goldfarb (Contact Author)
University of Maryland - Robert H. Smith School of Business ( email )
College Park, MD 20742-1815
United States
301-405-9672 (Phone)
301-314-8787 (Fax)
David Kirsch
University of Maryland ( email )
College Park, MD 20742
United States
David A. Miller
University of California, San Diego - Department of Economics ( email )
9500 Gilman Drive
La Jolla, CA 92093-0508
United States
858-822-0632 (Phone)
HOME PAGE: http://weber.ucsd.edu/~d9miller
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