Econometric Models of Duration Data in Entrepreneurship with an Application to Start-Ups’ Time-To-Funding by Venture Capitalists (VCs)

29 Pages Posted: 26 Oct 2020

See all articles by Paul P. Momtaz

Paul P. Momtaz

Technische Universität München (TUM) - TUM School of Management; University College London Center for Blockchain Technologies; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: September 24, 2020

Abstract

Because time is a key determinant of entrepreneurial decision making, time-to-event models are ubiquitous in entrepreneurship. Widespread econometric misconception, however, may cause complicated biases in existing studies. The reason is spurious duration dependency, a complicated form of endogeneity caused by unobserved heterogeneity. This article discusses the endogeneity problem and methods to debias time-to-event models in entrepreneurship. Simulations and empirical evidence indicate that only the frailty approach yields consistently unbiased parameter estimates. An application to start-up firms’ time-to-funding shows that other methods lead to dramatic biases. Therefore, this article advocates a paradigm shift in the modeling of time variables in entrepreneurship.

Keywords: Entrepreneurship, Time-to-Event Model, Survival Model, Frailty Model, Entrepreneurial Finance

JEL Classification: C41, M13, M16

Suggested Citation

Momtaz, Paul P., Econometric Models of Duration Data in Entrepreneurship with an Application to Start-Ups’ Time-To-Funding by Venture Capitalists (VCs) (September 24, 2020). Available at SSRN: https://ssrn.com/abstract=3698789 or http://dx.doi.org/10.2139/ssrn.3698789

Paul P. Momtaz (Contact Author)

Technische Universität München (TUM) - TUM School of Management ( email )

Arcisstr. 21
Munich, 80333
Germany

University College London Center for Blockchain Technologies ( email )

UCL CBT UCL Computer Science
Malet Place London WC
London, London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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