Face distance : unpacking the role of ethnic ties in venture capital investment
Author(s)
Wu, Jane Yajie Massachusetts Institute of Technology
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Alternative title
Unpacking the role of ethnic ties in venture capital investment
Other Contributors
Sloan School of Management.
Advisor
Scott Stern.
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Venture capitalists have been shown to be more likely to invest in entrepreneurs of the same ethnicity. At the same time, this result rests on assumptions about how shared ethnicity is defined both theoretically and empirically. Current measurement of ethnic ties is problematic due to mis-classifications, mixed heritage individuals, and variation in accuracy by ethnicity. This paper overcomes these limitations by taking advantage of a novel source of data -- face photographs -- and by applying advanced machine learning techniques to compute the facial similarity between investors and entrepreneurs in a large scale dataset of realized and potential investments. Results suggest that previous work has vastly underestimated the relationship between ethnic ties and investment. Moreover, this relationship is more nuanced than previously documented, varies with the stage of investment and the type of investors involved, and is associated with a lower likelihood of securing follow-on funding or achieving an exit.
Description
Thesis: S.M. in Management Research, Massachusetts Institute of Technology, Sloan School of Management, 2018. Cataloged from PDF version of thesis. Includes bibliographical references (pages 29-34).
Date issued
2018Department
Sloan School of ManagementPublisher
Massachusetts Institute of Technology
Keywords
Sloan School of Management.