The Value of PhDs: How the Presence of PhDs in Founding Teams Increases the Attractiveness of Startups for Corporate Investors

Abstract

The creation and development of new technology-based firms (NTBFs) is at the core of national prosperity, and constitutes a key activity of the innovation policies of advanced and developing economies. Many of these companies are founded by postgraduates that hold a doctorate (PhDs). Governments foster the creation of NTBFs by PhDs to take advantage of the stock of knowledge which exists in universities and research centers. It is assumed that founders with a high level of specialization and knowledge, such as PhDs, will bring strong competitive advantages to the companies they found. The literature in this regard, however, is scarce and inconclusive. We have studied the role of PhDs in founding teams of NTBFs in a specific kind of entrepreneurial process: corporate venturing. Our conclusions suggest that companies with PhDs are significantly more attractive to corporate venture capital. Corporate venturing has a higher propensity to invest in NTBFs with PhDs in the founding teams, and these companies concentrate a higher number of corporate investors, in a kind of accumulative effect.