Firm Dynamics and the Returns to Early-Stage Investment

47 Pages Posted: 13 Oct 2020 Last revised: 30 Aug 2021

See all articles by Katja Kisseleva

Katja Kisseleva

Frankfurt School of Finance & Management

Aksel Mjøs

Norwegian School of Economics (NHH) - Department of Finance

David T. Robinson

Fuqua School of Business, Duke University; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Date Written: August 24, 2020

Abstract

Most new companies neither grow nor attract outside financing, but a tiny fraction of innovative companies attract significant amounts of capital and grow dramatically. This paper uses detailed administrative records from the Norwegian Tax Authority to develop an ex ante measure of innovation and document the returns to investing in such companies. We trace out the entire funding and pricing histories of these firms to study transaction-level realized performance. Returns are extremely right-skewed, much more than has been previously recognized. Cross-sectional analysis shows persistent differences according to investor type that largely reflect different exit conditions.

Keywords: returns, investment, entrepreneurship, venture capital, early-stage financing.

JEL Classification: G11, G23, G24, G32

Suggested Citation

Kisseleva, Katja and Mjøs, Aksel and Robinson, David T., Firm Dynamics and the Returns to Early-Stage Investment (August 24, 2020). ESMT Berlin Working Paper, Available at SSRN: https://ssrn.com/abstract=3680129 or http://dx.doi.org/10.2139/ssrn.3680129

Katja Kisseleva (Contact Author)

Frankfurt School of Finance & Management

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Aksel Mjøs

Norwegian School of Economics (NHH) - Department of Finance ( email )

Helleveien 30
N-5045 Bergen
Norway

David T. Robinson

Fuqua School of Business, Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0120
United States
919-660-8023 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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