Entrepreneurial Management

- October 2024
- Article
Founder-CEO Compensation and Selection into Venture Capital-Backed Entrepreneurship

By: Michael Ewens, Ramana Nanda and Christopher Stanton

We show theoretically that a critical determinant of the attractiveness of VC-backed entrepreneurship for high-earning potential founders is the expected time to develop a startup’s initial product. This is because founder-CEOs’ cash compensation increases substantially after product development, alleviating the non-diversifiable risk that founders face at startup birth. Consistent with the model’s predictions of where the supply of entrepreneurial talent is likely to be most constrained, we find that technological shocks differentially altering the expected time to product across industries can explain changes in both the rate of entry and characteristics of individuals selecting into VC-backed entrepreneurship.
- October 2024
- Article
Founder-CEO Compensation and Selection into Venture Capital-Backed Entrepreneurship

By: Michael Ewens, Ramana Nanda and Christopher Stanton

We show theoretically that a critical determinant of the attractiveness of VC-backed entrepreneurship for high-earning potential founders is the expected time to develop a startup’s initial product. This is because founder-CEOs’ cash compensation increases substantially after product development, alleviating the non-diversifiable risk that...
- September 24, 2024
- Article
4 Steps That Can Optimize Your Sales Process

By: Frank V. Cespedes, Scott Peterson and Daniel Weinfurter
- September 24, 2024
- Article
4 Steps That Can Optimize Your Sales Process

By: Frank V. Cespedes, Scott Peterson and Daniel Weinfurter
- September 2024
- Case
Comun: Partners in Peril

By: Jeffrey J. Bussgang and Alexis Lefort

In spring 2023, Abiel Gutierrez and Andres Santos, co-founders of Comun, faced a critical decision at their fintech startup serving Latino immigrants. Having launched their product the previous year, they experienced rapid growth but encountered rising fraud and increasing regulatory barriers imposed by their banking partner, Piermont. These challenges threatened the company's core value proposition and the viability of its unit economics. Gutierrez and Santos were at a crossroads: Should they switch partners, a risky move given their limited financial runway, or stick with their current flawed infrastructure and risk stalling the company's growth? The case explores the complexities of partner reliance, regulatory hurdles, and the difficult strategic choices early-stage startups must navigate.
- September 2024
- Case
Comun: Partners in Peril

By: Jeffrey J. Bussgang and Alexis Lefort

In spring 2023, Abiel Gutierrez and Andres Santos, co-founders of Comun, faced a critical decision at their fintech startup serving Latino immigrants. Having launched their product the previous year, they experienced rapid growth but encountered rising fraud and increasing regulatory barriers imposed by their banking partner, Piermont. These...

About the Unit

The Entrepreneurial Management Unit strives to raise the level of academic work in the field of entrepreneurship, in methodological rigor, conceptual depth, and managerial applicability. We also strive to improve the odds of entrepreneurial success for our students and for practitioners worldwide.

Because it is such a complex phenomenon, entrepreneurship must be studied through multiple lenses. We use three.

The process of entrepreneurship - We seek to understand the processes of entrepreneurial activity in start-ups and established firms by examining the antecedents and consequences of various forms of entrepreneurial opportunity identification and opportunity pursuit for individuals, organizations, and industries. We see experimentation and innovation in products, services, processes, and business models as central to entrepreneurial activity.
The finance of entrepreneurship - We seek to understand the financing of entrepreneurial ventures by studying the antecedents and consequences of entrepreneurial funding decisions both domestically and internationally.
The context of entrepreneurship - We seek to understand the ways in which entrepreneurs both respond to and shape the context in which they operate, by examining the history of entrepreneurship across time and national borders and by analyzing the legal and cultural contexts for managerial action.

Please also visit the Arthur Rock Center for Entrepreneurship.

Recent Publications

Founder-CEO Compensation and Selection into Venture Capital-Backed Entrepreneurship

By: Michael Ewens, Ramana Nanda and Christopher Stanton

October 2024 |
Article |
Journal of Finance

We show theoretically that a critical determinant of the attractiveness of VC-backed entrepreneurship for high-earning potential founders is the expected time to develop a startup’s initial product. This is because founder-CEOs’ cash compensation increases substantially after product development, alleviating the non-diversifiable risk that founders face at startup birth. Consistent with the model’s predictions of where the supply of entrepreneurial talent is likely to be most constrained, we find that technological shocks differentially altering the expected time to product across industries can explain changes in both the rate of entry and characteristics of individuals selecting into VC-backed entrepreneurship.

Keywords: Entrepreneurship; Venture Capital; Executive Compensation

4 Steps That Can Optimize Your Sales Process

By: Frank V. Cespedes, Scott Peterson and Daniel Weinfurter

September 24, 2024 |
Article |
Harvard Business Review (website)

Citation

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Comun: Partners in Peril

By: Jeffrey J. Bussgang and Alexis Lefort

September 2024 |
Case |
Faculty Research

In spring 2023, Abiel Gutierrez and Andres Santos, co-founders of Comun, faced a critical decision at their fintech startup serving Latino immigrants. Having launched their product the previous year, they experienced rapid growth but encountered rising fraud and increasing regulatory barriers imposed by their banking partner, Piermont. These challenges threatened the company's core value proposition and the viability of its unit economics. Gutierrez and Santos were at a crossroads: Should they switch partners, a risky move given their limited financial runway, or stick with their current flawed infrastructure and risk stalling the company's growth? The case explores the complexities of partner reliance, regulatory hurdles, and the difficult strategic choices early-stage startups must navigate.

Keywords: Fintech; Startup; Partnerships; Business Development; Banking Industry; Financial Services; Venture Capital; Financial Services Industry; Latin America; United States

Citation

Educators

Investing in the Next Generation: The Long-Run Impacts of a Liquidity Shock

By: Patrick Agte, Arielle Bernhardt, Erica M. Field, Rohini Pande and Natalia Rigol

September 2024 |
Article |
American Economic Review

How do poor entrepreneurs trade off investments in business enterprises versus children's human capital, and how do these choices influence intergenerational socio-economic mobility? To examine this, we exploit experimental variation in household income resulting from a one-time relaxation of household liquidity constraints (Field et al., 2013), and track schooling and business outcomes over the subsequent 11 years. On average, treatment households, who were made wealthier through the experiment, increase human capital investment such that their children are 35% more likely to attend college. However, schooling gains only accrue to children with literate parents, among whom college attendance nearly doubles. In contrast, treatment effects on investment among the illiterate accrue only on the business margin and are accompanied by adverse educational outcomes for children. As a result, treatment lowers relative educational mobility. In a forecasting exercise, we find that earnings gains for literate households are four times larger than the earnings gains for illiterate households, raising earnings inequality. Our findings highlight how parental investment choices can contribute to a growth in intergenerational earnings inequality despite reductions in urban poverty.

Keywords: Socio-economic Mobility; Entrepreneurship; Education; Income; Literacy; Poverty

Citation

Find at Harvard

Modernizing the U.S. Exchange Visitor Skills List

By: William R. Kerr and Michael C. Clemens

2024 |
White Paper |
Faculty Research

Keywords: Immigration; Labor; Competency and Skills

Citation

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Sales Coaching and Value Creation

By: Frank V. Cespedes

September 2024 |
Article |
Top Sales Magazine

Despite the prevalence of “coachability” in firms’ stated hiring criteria, managers over-estimate the amount of time they actually devote to coaching their people. For example, research indicates that only 15% of sales managers even spend as much as 25% of their time on coaching. Moreover, many managers believe coaching is about sitting down with an employee and discussing results. That’s an audit, not a skill-building interaction. And few managers will admit they don’t really know how to give developmental feedback versus a “get better” sermon. This article focuses on sales people and discusses important pre-requisites for effective coaching, three common scenarios, and the coaching options relevant to each situation.

Keywords: Competency and Skills; Employee Relationship Management; Management Practices and Processes

Citation

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Standing on the Shoulders of Science

By: Joshua Lev Krieger, Monika Schnitzer and Martin Watzinger

September 2024 |
Article |
Strategic Management Journal

Today’s innovations rely on scientific discoveries of the past, yet only some corporate R&D builds directly on scientific output. In this paper, we analyze U.S. patents to investigate how firms generate value by building on prior art “closer” to science. We show that patent value is decreasing in distance-to-science. Overall, we find a science premium within firms ranging from 5.0% and 18.3%. If we allow for firm sorting into different modes of R&D based on their relative advantage, i.e., when we do not control for firm fixed effects, we find an even larger science premium: patents building directly on scientific publications are 4.0%–42.3% more valuable than patents in the same technology that are not directly based on science.

Keywords: Patent Novelty; Value Capture; Science; Patents; Valuation; Research and Development

Citation

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Sky Therapeutics: Innovating in Digital Therapeutics

By: Satish Tadikonda, Olivia Reszczynski and William Marks

August 2024 |
Case |
Faculty Research

Shad Faraz and Alex Youssef were intrigued by the opportunities in the relatively new area of Digital Therapeutics. Despite initial successes, early entrants had struggled with reimbursement and revenue-predictability challenges. However, venture investors still continued to be enthusiastic about the space, prompting Faraz and Youssef to dive headfirst into the world of entrepreneurship and found Sky Therapeutics. Although their decision to pursue their startup full-time was exciting, they also needed to tackle pressing questions and unique challenges around the right clinical problem to target and with what technological and behavioral mechanism. Would the digital therapeutics space flourish or flop, and how would that affect Sky's prospects?

Keywords: Business Startups; Entrepreneurship; Mission and Purpose; Health Industry; Technology Industry

Citation

Educators

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