Essays on Financing of Entrepreneurship and Innovation

Chapter 1 examines how venture capitalists (VCs) adapt their financing strategies to support startups competing against deep-pocketed incumbents. Employing textual analysis to identify a startup's potential competitors, I show that when competitors are cash-rich, VCs deploy a financing strategy characterized by less conditionality, as observed through larger, less frequent funding rounds that are less contingent on short-term performance. This strategy requires VCs to rely more on continuous monitoring and liquidation protection, and is restricted to larger funds with specialized experience. My results suggest that, as incumbents have gained greater financial power, VCs serve as a counter-balancing force to sustain business dynamism. The second chapter examines the human capital and organization features of VC partnerships. I explore the unique features of Venture Partners (VPs) compared to General Partners (GPs) in VC firms. VPs typically have a technical or life sciences background and bring substantial operational experience, often as founders, contrasting with the finance-oriented backgrounds and experience of GPs. I study the impact of VPs on startup performance, revealing that VP-associated startups outperform the non-VP associated startups. However, these results are driven by the quality of VC firms that hire VPs. Compared to other startups in the portfolios of VP-hiring partnerships, VPs are assigned to more challenging lower-quality startups. Finally, I examine the influence of VPs on partnership-level performance over time, indicating that while VPs do not significantly impact short-term performance, their presence is associated with improved long-term outcomes and more efficient exit strategies. Chapter 3 studies the interplay between political connections and innovation. This chapter investigates the strategic role of political connections in shaping a firm's innovation strategy and how it enables the firm to navigate market competition and policy uncertainties. Utilizing data from U.S. public firms from 2000 to 2014, I empirically demonstrate that political capital significantly influences a firm's investment in innovation, especially under specific market conditions. I find that the relationship between political connections and innovation intensifies in markets with lower levels of product market competition and political risk, where incumbents can reap more benefits from their connections. Exploiting corporate donations to close election races, I verify the baseline results, allowing for a causal interpretation of these findings.

Grantor dc:publisher

UNSW, Sydney

Year dc:date

2024

Author dc:creator

• Rezaei, Roham

Statement dc:rights

• open access
• CC BY 4.0
• free_to_read

Licence

• https://purl.org/coar/access_right/c_abf2
• https://creativecommons.org/licenses/by/4.0/

Language dc:language

en

Identifier

https://doi.org/10.26190/unsworks/30352

OAI identifier oai:identifier

oai:unsworks.library.unsw.edu.au:1959.4/102656