Working Papers

The Startup Performance Disadvantage(s) in Europe: Evidence from Startups Migrating to the U.S. (JMP, SSRN)

Presentations: European Finance Association (EFA, scheduled), Royal Economic Society (RES), American Economic Association (AEA, poster), ifo Institute Munich, Entrepreneurial Finance Conference (ENTFIN), Technical University of Munich, Politecnico Milano

This paper uses novel data on the migration of European startups to the United States to understand Europe's main disadvantages in startup performance. I use positive sorting in migration as an identification strategy: because of positive sorting, the simple cross-sectional comparison gives an upper bound on the effect of the U.S. ecosystem compared to the European one. Results show that U.S. migrants receive much more venture capital (VC) funding, produce more innovation, and reach much bigger scale by exit than startups staying in Europe. More surprisingly, however, U.S. migrants do not increase revenue for many years after migration, incur higher losses for long time periods, and do not have a higher likelihood of successful exit than European stayers. Furthermore, a large part of the difference in innovation and scale can be explained by the U.S. funding advantage. These results are consistent with the view that technology, product, and exit markets hinder European startups little, if at all, but that Europe’s VC funding market is its major obstacle to startup performance. 


Venture Capital and the international Relocation of Startups (With Ann-Kristin Achleitner & Reiner Braun) - Forthcoming in research policy (link)

Presentations: European Financial Management Association (EFMA)

Venture capital (VC) in Europe is still developing and relies heavily on foreign investment. This raises concerns that startups are migrating out of Europe as a consequence. Using a novel large-scale data set of startup headquarter (HQ) location histories, we document that cross-border startup relocation is common in Europe: About 6\% of startups move across borders, which account for a disproportionate 14\% of total startup value. We also document that most relocation is towards the US, and that relocation leads to most of the startup's workforce ending up in the foreign country. Moreover, our results show that foreign VC investment, particularly from the US, is strongly associated with relocation, with the effect implying that one in ten US investments leads to relocation. This foreign VC effect is robust to matching, panel data, and instrumental variable analyses, and is more pronounced when startup financing conditions are poor. These findings provide new insights into the international migration of European startups, and suggest that the outflow can be addressed by improving startups' local financing conditions.


Follow the Money: How Venture capital Facilitates the Emigration of Firms and Entrepreneurs in Europe (With Reiner Braun & Ann-Kristin AchleitneR; SSRN)

Presentations: Swiss Society for Financial Market Research (SGF Conference), Australasian Finance and Banking conference (AFBC)

The increasingly global venture capital (VC) business raises the question of whether foreign VC investments pull economic activity away from domestic economies. This paper analyzes whether foreign VC influences the emigration patterns of European venture-backed firms and entrepreneurs. To address endogeneity issues, we instrument foreign VC activity with U.S. buyout fund fundraising (Nanda et al., 2013). Results show that foreign investors, particularly from the U.S., back better European ventures and facilitate foreign exits and entrepreneur emigration. These findings suggest that VC firms are a funnel through which countries with international venture capitalists absorb high-impact economic actors.

 Work in progress

Impact of Entrepreneurship Education Programs: Quasi-Experimental Evidence (Michael Froehlich, Aaron Defort, Isabel Welpe & Chuck Eesley)

Selecting Private Equity Targets with Machine Learning (with Reiner Braun & Alex Schneider)

CEOs in Private Equity (with Reiner Braun, Tim Jenkinson & Daniel Urban)

Individual Careers in Venture Capital (with Svenja Barth & Reiner Braun)