We investigate the impact of misconduct on the financing and exit opportunities of entrepreneurial ventures that are technologically related to the misconduct perpetrators. To do so, we consider all reported misconduct cases affecting US startups during 1998-2020 and estimate differences-in-differences models saturated with fixed effects. We show that startups producing similar technologies as the misconduct perpetrators become less likely to obtain financing and raise smaller amounts after the misconduct event is reported in the news, relative to startups developing dissimilar technologies located outside the perpetrators state. The strongest negative effects of misconduct are found to be associated with technological misconduct and sexual harassment, followed by financial fraud, while misconducts related to intellectual property infringements have statistically insignificant impact. Startups related to misconduct perpetrators are no less likely to be acquired than unrelated startups.
Contact person: Daehyun Kim
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