"Initial Coin Offerings: Financing Growth with Cryptocurrency Token Sales." With Marina Niessner and David Yermack. R&R at the Review of Financial Studies.
Initial coin offerings (ICOs) are a significant innovation in entrepreneurial finance. The sale of a blockchain-based digital token associated with a specific platform or venture is a new financing instrument with some parallels to IPOs, venture capital, and pre-sale crowdfunding. We examine the relationship between issuer characteristics and measures of success, with a focus on liquidity, using 453 ICOs that collectively raise $5.7 billion. We also employ proprietary transaction data in a case study of Filecoin, one of the most successful ICOs. We find that liquidity and trading volume are higher when issuers offer voluntary disclosure, credibly commit to the project, and signal quality.
Howell, Sabrina, Lee, Henry, and Heal, Adam. 2014. “Leapfrogging or Stalling Out? Electric Vehicles in China.” Discussion Paper, Belfer Center for Science and International Affairs, Harvard Kennedy School.
Howell, Sabrina. 2013. “Pathways for Reducing Oil Consumption in the U.S.” Carbon War Room & Fuel Freedom Foundation Research Report.
Howell, Sabrina. 2009. “Jia You! (Add Oil!): Chinese Energy Security Strategy.” In Luft, Gal and Anne Korin, eds. Energy Security Challenges for the 21 Century. California: Praeger Publishing.
Smith, Anne E. and Sabrina Howell. 2009. “An Assessment of the Robustness of Visual Air Quality Preference Study Results.” Environmental Protection Agency Clean Air Scientific Advisory Committee (EPA CASAC) Particulate Matter Review, Public Comments, March 30.
"Entrepreneurial Spillovers from Corporate R&D." With Tania Babina.
Using U.S. Census data, we show that corporate research and development (R&D) investment increases employee departures to entrepreneurship. We identify a causal effect with changes in federal and state tax incentives. High-tech parents drive the effect, and R&D-induced startups are much more likely to be venture capital-backed than the average employee-founded startup. This is the first evidence of employee startups as a type of R&D spillover. New ideas seem to be the primary channel, though new skills likely also play a role. R&D investment appears to lead to new growth options that are located outside the firm boundary.
This paper uses administrative data from 87 new venture competitions in 17 U.S. states to show that winning has large, positive effects on measures of subsequent venture success, including employment and financing. While cash prizes are valuable, especially for founders who are likely financially constrained, winning is independently useful. Certification may be one mechanism, but it does not seem to be the primary one. An alternative is that competitions help entrepreneurs learn about their projects’ quality. Receiving negative feedback is shown to increase venture abandonment, suggesting that competitions are useful in part because they facilitate faster type revelation.
"When Investor Incentives and Consumer Interests Diverge: Private Equity in Higher Education." With Charlie Eaton and Constantine Yannelis.
This paper uses private equity buyouts to study a transition from lower- to higher-powered profit-maximizing incentives in higher education, a sector heavily dependent on government subsidy. Private equity owners have especially high-powered incentives to maximize profits. In a subsidized industry, this could intensify focus on capturing government aid at the expense of consumer outcomes. Employing novel data on 88 private equity deals and 994 schools with private equity ownership, we find that private equity buyouts lead to higher enrollment and profits, but also to lower education inputs, higher tuition, higher per-student debt, lower graduation rates, lower student loan repayment rates, and lower earnings among graduates. Neither changes to the student body composition nor a selection mechanism fully explain our results. In a series of tests exploiting regulatory events and thresholds, we find that private equity-owned schools are better able to capture government aid.
Minsk, Ronald E., Sam P. Ori, and Sabrina Howell. “Plugging Cars into the Grid: Why the Government Should Make a Choice.” Energy Law Journal 30(2), 2009. [Journal website.]
Berman, Jillian. 2018. "When private equity firms buy colleges, students often pay more." Sept 7.
Segal, Julie. 2018. "When Private Equity Wins and Consumers Lose." The Institutional Investor, Sept 4.
I am an Assistant Professor of Finance at NYU's Stern School of Business, and a Faculty Research Fellow at the National Bureau of Economic Research (NBER). My research and teaching focus on entrepreneurial finance, innovation, fintech, energy, and China.
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NON-PEER REVIEWED PUBLICATIONS
"Listing Delays and Innovation: Evidence from Chinese IPOs.” With Will Cong.
Regulators have suspended IPOs in China on numerous occasions, exposing firms already approved to IPO to indeterminate listing delay. These disruptions curtail firms’ timely access to risk capital and increase uncertainty. After firms ultimately list, suspension-induced delay substantially reduces their innovation activity, measured using patent quantity and quality. These effects begin during the delay and endure for years after listing, while impacts on other firm outcomes are short-lived. The corporate innovation process, like an individual’s accumulation of human capital, has a cumulative dimension. Interrupting it can be detrimental in the long term, highlighting the importance of well-functioning IPO markets.
Council on Foreign Relations. 2015. "Keeping the Edge: U.S. Innovation." Report.
Smith, Noah. 2015. "Angel Investing, Government Style." Bloomberg. July 9.
Pethokoukis, James. 2015. "Uncle Sam, angel investor?" AEIdeas, July 15.
Davis, Lucas. 2015. "How Should We Design Government Policies to Stimulate Innovation?" Haas Energy Institute. March 23.
Gill, Dee. 2015. "Small, Early Stage R&D Grants to Energy Startups have Large Impact." Chicago Booth Daily Data. February 2.
Howell, Sabrina. 2014. "The Impact of Government Grants in the Clean Energy Sector." Cleantech Group. January 9.
This paper explores whether and why private and public firms experience different costs of risk management. I exploit a natural experiment in highway procurement, which features diverse firms with common exposure to commodity risk. The Kansas government began to insure highway-paving firms against oil price risk in 2006. With a difference-in-differences design using data from 1998 to 2012, I evaluate the policy’s effect in Kansas relative to Iowa, which never introduced such a policy. A first step shows that the policy reduced procurement costs, increased competition, and reduced bid sensitivity to oil price volatility. This permits examining which firms exhibit more risk pass-through. I find the most pass-through among private firms with high credit risk and low industry diversification, and no pass-through for public firms. Family-owned firms do not have a higher cost of risk. Financial constraints and distress costs appear to best explain the cost of risk management, rather than risk aversion, information, or agency problems.
Sabrina T. Howell
Governments regularly subsidize new ventures to spur innovation. This paper conducts the first large-sample, quasi-experimental evaluation of R&D subsidies. I use data on ranked applicants to the U.S. Department of Energy’s SBIR grant program. An early stage award approximately doubles the probability that a firm receives subsequent venture capital and has large, positive impacts on patenting and revenue. These effects are stronger for more financially constrained firms. Certification, where the award contains information about firm quality, likely does not explain the grant effect. Instead, the grants are useful because they fund technology prototyping.
Howell, Sabrina T. “Joint Ventures and Technology Adoption: A Chinese Industrial Policy that Backfired.” Research Policy 47(8), 2018. [Journal website.]
To spur technology transfer, emerging market policymakers often require foreign firms to form joint ventures (JVs) with domestic firms. Through knowledge spillovers, JVs may reduce technology acquisition costs for domestic firms. Yet domestic firm rents from JVs could discourage innovation through a cannibalization effect. Which force dominates is an empirical question. I address it with novel data on China’s auto sector. In response to fuel economy standards requiring firms to upgrade technology or sacrifice quality, firms with JVs reduced quality and price relative to their counterparts. Consistent with cannibalization, firms with JVs drive the negative effect.