Economics of Entrepreneurship and Venture Capital

Designed for Harvard College sophomores.

Course Description: Why do so many individuals choose to pursue entrepreneurship despite substantial risks? How do these entrepreneurs raise money to finance their ventures? And what is the impact of entrepreneurship on the broader economy? Entrepreneurship as a field of study is often traced back to Schumpeter’s work on innovation and his theory of “creative destruction.” However, this field remained fairly inactive until recently, with an explosion of interest over the past decade. This tutorial will provide an overview of this growing academic literature on entrepreneurship and will help students learn to identify areas to contribute to this active field. First, we will tackle broad questions on the entrepreneurial phenomenon as a whole, including the role of information and contracting problems, the supply of entrepreneurs, the expected returns to entrepreneurship, and the impact of geography. We will then turn to the individual journey of the entrepreneur, studying the extant literature on opportunity recognition, resource mobilization, scaling and growth, and acquisitions and IPOs. We will primarily study these topics through an economic lens, however, given the multi-disciplinary nature of entrepreneurship research, we will also explore some work drawing on other disciplines such as sociology and psychology with the goal of contrasting perspectives and highlighting some opportunities for interdisciplinary research.