Brent Goldfarb

Associate Professor

Management & Entrepreneurship

Robert H. Smith School of Business

University of Maryland

College Park, MD 20742

Phone (Grand Central) (202) 730-9484

Fax: (301) 314-8787

Email: bgoldfarb - at -

My curriculum vitae  (CV_Goldfarb) (11.10.2008)


Entrepreneurship, New Venture Creation, Entrepreneurship and New Ventures (Spring 2007, Fall 2007)

Corporate Venturing (Fall 2005, Spring 2006)

The web sites for these courses use the Blackboard system, and are accessible only to registered students.

Publications & Working Papers
My publications are divided into two subjects: The Dot Com Era & Private Equity  and Technology Commercialization


Dot Com Era & Private Equity

Was there too little entry during the Dot Com Era?

Journal of Financial Economics 86(1) 100-144  (2007). (; 730K)

Joint with David Kirsch and David Miller.

Abstract: The rapid commercialization of the internet was characterized by a belief in the “Get Big Fast” business strategy. We develop a formal model of venture capitalists and their investors that describes specific conditions in which beliefs could rationally coalesce around a business strategy that was, ex post, wrong. We find that, historically, conditions existed that increased the likelihood of a cascade on incorrect beliefs. A direct implication of such a belief cascade is too little entry and subsequently high survival rates of early internet entrants. The model shows that investors may withhold funds from venture capital once the cascade is exposed, slowing the recovery from the cascade. We exploit a dataset of 788 Dot Com startups. Consistent with a belief cascade we find a high survival rate that is independent of entry size. Observed venture capital funding patterns are also predicted by the model.

Covered by The Wall Street Journal (Lee Gomes, "The Dot-Com Bubble is reconsidered, And maybe relived," p. B1, November 8, 2006).

Covered by (Leslie Taylor, "The dot-com bust? Not as bad as you think," December 4, 2006).


Are Angels Preferred Series A Investors?


Joint with Gerard Hoberg, David Kirsch and Alexander Triantis

Abstract: We examine the impact of business angels on 182 Series A financings and subsequent company outcomes. Our studied rounds have a varied mix of business angel and formal venture capital investors (VCs). We find that when only angels participate in a financing round and VCs are absent, control rights are more entrepreneur-friendly, legal expenses are lower, and investors are more geographically proximate to the company. Such angel-backed companies are less likely to fail and are more likely to have a successful liquidity event. We find that companies financed exclusively by VC investors also perform well, particularly when deals are large. Companies financed by both angels and VCs experience inferior outcomes. Our results suggest that entrepreneurs consider business angels to be preferred investors and VCs investing in small deals face adverse selection. For larger deals, where deeper-pocket VC participation is required, these roles reverse and angels face adverse selection when investing alongside powerful VC syndicates.


"Small Ideas, Big Ideas, Bad Ideas, Good Ideas: “Get Big Fast” and Dot Com Venture Creation", Forthcoming (2007). In William Aspray and Paul Ceruzzi, eds., The Internet and American Business  (Cambridge: MIT Press).

Joint with David Kirsch

In this paper, we establish a series of starting points for understanding the emergence of the industries associated with the commercial internet. First, we report baseline estimates of the number of internet technology companies created from 1994-2001. Approximately 50,000 companies solicited venture capital to exploit the commercialization of the internet. Of these, less than 15% followed the GBF-model of venture-backed growth. Fewer than 500 companies (<1%) had an initial public offering. Within the larger set of initial entrants, however, the five-year survival rate was 48%. The survival rate is higher than most observers typically predict and similar to that associated with the introduction of other general purpose technologies. Standing in stark contrast to the popular picture of the Dot Com era consisting of a boom phase followed by an unprecedented bust, our findings suggest underlying continuity in the exploitation of entrepreneurial opportunities arising from the diffusion of a new general purpose technology.

Blogged by Marc Andreeson:

Linked by  Brad de Long


Searching for Ghosts: Business Survival, Unmeasured Entrepreneurial Activity and Private Equity Investment in the Dot-Com Era ( ) (direct download; 540K)

Joint with David Kirsch and Michael Pfarrer.

Abstract: A novel database of business planning documents that closely approximates the population of Dot-Com entrepreneurs is introduced and used to compile three estimates: 1) the survival rate of dot-com startups, which we find is 48%; 2) the number of dot-com startups from 1998-2002, which we find to be on the order of 50,000 firms; and 3) the amount of private equity invested in the Dot-Com Era, which we find exceeds reported funding by as much as 18%. The estimates offer the first detailed characterization of the population of firms that supplied the venture capital and IPO markets during the Dot Com Era. We conclude that the Dot-Com Era, broadly considered, was a legitimate response to a technology shock.


Form or Substance? The Role of Business Plans and Social Networks in Venture Capital Decision Making (available upon request)

Joint with David Kirsch and Azi Gera

Abstract: We explore a well-known instance of fast decision making under high uncertainty, venture capital (VC) opportunity screening. We analyze a sample of 722 funding requests submitted to an American VC firm and evaluate the influence of social mediation as well as the submission and content of business planning documents on VC funding decisions. We improve on prior literature by a) using a large sample of known representativeness and b) by relating request characteristics to actual VC decisions. We find that social mediation is only weakly associated with opportunity quality and therefore is a poor screening instrument. The presence of planning documents and some information contained therein is weakly associated with VC funding decisions. Based on our inferential strategy, we find that this information is learned independent of its inclusion in the business planning documents.


Lessons of the Last Bubble  (2007), Strategy+Business 46 (Spring) 26-31. (Practitioner Oriented) (direct download)

with Tim Laseter and David Kirsch

Covered in The New York Times.

Appropriability and Commercialization: Evidence from MIT Inventions  forthcoming Management Science. ( ) (direct download; 290K)
Joint with Emmanuel Dechenaux, Scott Shane and Marie Thursby.

Abstract: At least since Arrow (1962), the effects of appropriability on invention have been well studied, but there has been little analysis of the effect of appropriability on the commercialization of existing inventions. Exploiting a database of 805 attempts by private firms to commercialize inventions licensed from MIT between 1980 and 1996, we explore the influence of several appropriability mechanisms on the commercialization and termination of projects to develop products based on university inventions. Our central hypothesis is that the relationship between a licensee's decision to either terminate or commercialize the invention is driven by the current market value of the invention, as well as the option value of delaying its commercialization. We use a competing risks framework that allows for non-parametric heterogeneity and correlated risks. We find that better appropriability in the sense of more effective patent strength and secrecy has a strong negative effect on the hazard of license termination. The effectiveness of learning has a strong positive effect on the hazard of technology commercialization, while lead time has a negative effect.


The Effect of Government Contracting on Academic Research: An Empirical Analysis of Reputation in Research Procurement. Forthcoming, Research Policy  ( (direct download; 250K)

 Abstract: The growing share of university research funded by industry has sparked concerns that academics will sacrifice traditional scholarly activities to pursue commercial goals. To investigate this concern, I examine the influence of an applied sponsor and consider limitations of the grant funding mechanism. A novel dataset tracks the careers of academic engineers and their relationships with this sponsor. I find that a) researchers who maintain a relationship with the directed sponsor experience a \emph{decrease} in publications implying that academics' careers may be a function of the type of funding received, not only talent, b) academic merit does not necessarily serve as a funding criterion for sponsors, and c) citation and publication measures of academic output are often not useful proxies for short-term commercial or social value.


Bottom-up versus top-down policies towards the commercialization of university intellectual property,
Research Policy 32(4): 639-658 (direct download; last working paper version) (direct download; published version 160K)  

Joint with Magnus Henrekson 

Abstract: What national policies are most efficient in promoting the commercialization of university-generated knowledge? We address this question by characterizing and evaluating the policy pursued in Sweden and the US, two countries that put a great deal of resources into university R&D, but follow very different models for commercialization. Despite a leading academic record, there is an impression of laggard rates of commercialization of academic research results in Sweden. Although there exist no micro data to evaluate this impression, we argue that it is likely to be true in part due to the top-down nature of Swedish policies aimed at commercializing these innovations as well as an academic environment that discourages academics from actively participating in the commercialization of their ideas. This sits in stark contrast to a US institutional setting characterized by competition between universities for research funds and research personnel, which in turn has led to significant academic freedoms to interact with industry, including significant involvement in new firms.

Diffusion of general-purpose technologies: understanding patterns in the electrification of US Manufacturing 1880–1930 Industrial and Corporate Change 2005 14(5):745-773 (direct download)

Abstract: I examine the diffusion of the electric motor between 1880 and 1930. I find that long lag times are determined by the degree of technical difficulty in application. After solutions became available, electrification generally proceeded rapidly. To make this claim, I explore three industries: urban transit, printing and paper making. I identify points at which viable electric solutions to particular problems were found and examine adoption patterns both before and after these events. The explanation contrasts with common demand-side explanations such as costly user-adaptation or information diffusion, and imposes conditions on the application of standard supply side models. The results are particularly important when examining the diffusion of broadly defined technological categories, such as general-purpose technologies.


Intellectual Property Rights and Entrepreneurship: Evidence from University Technology Transfer (email for paper requests)

Joint with Jeannette Colyvas

Abstract: Economic theory predicts that strong property rights should be associated with technology commercialization and the transfer of tacit knowledge (inalienable human capital) regardless of the nature of the commercializing firm. We develop an illustrative formal model to outline this logic. We empirically test the theoretical implications of the model using data from Stanford University and find that strong property rights are primarily associated with inventor effort in inventor-founded startups only, and not all firms generally. For university technology transfer, our results suggest that intellectual property rights encourage inventor entrepreneurship, but are less critical for technology transfer to established firms.


Tacit Knowledge, Uncertainty and Startups (email for paper requests)

Joint with Jeannette Colyvas

Abstract: Why are some ideas commercialized in startup firms and others are not? In this paper, we explore characteristics of knowledge, in particular, tacit knowledge and uncertainty and apply neoclassical economic theory to predict which of these characteristics are likely to lead to market failure and hence startup activity. We then test the theory empirically. Using new data from Stanford University, we find that uncertainty, not tacitness, determines the commercialization setting.


Scholarship and Inventive Activity in the University: Complements or Substitutes? (email for paper requests)

Joint with Gerald Marschke and Amy Smith

Abstract: The growing involvement of industry in University-based scientific research has been an important subject of debate in the United States. Universities are engaging in more licensing and patenting activities then ever before, and the amount of research funded by industry is increasing. The literature on the subject generally voices a concern that academics’ commercialization activities may inhibit traditional academic scholarship. If the hypothesis is correct and the output of such scholarship is an important input into technological innovation and economic growth, then such an inhibition would be cause for concern. We test this and other hypotheses using a unique dataset on the activities and productivity of Stanford University’s scientific faculty.



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