Debiasing Time-to-Event Models in Entrepreneurship

29 Pages Posted: 26 May 2020

See all articles by Paul P. Momtaz

Paul P. Momtaz

University of California, Los Angeles (UCLA) - Anderson School of Management; Technische Universität München (TUM) - TUM School of Management; University College London Center for Blockchain Technologies

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Date Written: May 9, 2020

Abstract

Because time is a key determinant of entrepreneurial decision making, time-to-event models are ubiquitous in entrepreneurship. Widespread econometric misconception, however, may cause complicated biases in existing studies. The reason is spurious duration dependency, a complicated form of endogeneity caused by unobserved heterogeneity. This article discusses the endogeneity problem and methods to debias time-to-event models in entrepreneurship. Simulations and empirical evidence indicate that only the frailty approach yields consistently unbiased parameter estimates. An application to start-up firms’ time-to-funding shows that other methods lead to dramatic biases. Therefore, this article advocates a paradigm shift in the modeling of time variables in entrepreneurship.

Keywords: Entrepreneurship, Entrepreneurial Finance, Time-to-Event Model, Survival Model, Frailty Model

JEL Classification: C41, M13, M16

Suggested Citation

Momtaz, Paul P., Debiasing Time-to-Event Models in Entrepreneurship (May 9, 2020). Available at SSRN: https://ssrn.com/abstract=3597240 or http://dx.doi.org/10.2139/ssrn.3597240

Paul P. Momtaz (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

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Los Angeles, CA 90095-1481
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Technische Universität München (TUM) - TUM School of Management ( email )

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Munich, 80333
Germany

University College London Center for Blockchain Technologies ( email )

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United Kingdom

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