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

Michael Ewens, Ramana Nanda and Christopher T. Stanton

No 27296, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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 in- creases 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.

JEL-codes: G24 G3 G32 J24 J3 (search for similar items in EconPapers)
Date: 2020-06
New Economics Papers: this item is included in nep-ent, nep-hrm, nep-lma and nep-pay
Note: CF PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Founder-CEO Compensation and Selection into Venture Capital-Backed Entrepreneurship (2023)
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