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Linghang Zeng and Andriy Shkilko
Linghang Zeng and Andriy Shkilko

Northern Finance Association Announces 2019 Lazaridis Prize winner

The Northern Finance Association (NFA) has announced the winner of the 2019 Lazaridis Prize for Best Paper. Taking the prize this year is Dr. Linghang Zeng, Assistant Professor at Babson College, for his paper Impact of Venture Capital Flows on Incumbent Firms: Evidence from 70 Million Workers.

In his research, Linghang used an anonymized employer – employee matched payroll dataset of 70 million workers to examine the effect of venture capital (VC) investment flows on large local incumbent firms.

“I found that a VC investment of $1,000 per capita nearly doubles the wage growth for high-skilled workers in that region, while there is no effect for low-skilled workers,” remarks Linghang. “This wage effect is particularly strong in regions with inelastic short-term labor supply, and regions with lower enforceability of non-compete agreements. To mitigate concerns about time-varying shocks at the industry-region level, I exploit within-industry-state and within-firm variation, conduct occupation-level analysis, and utilize variation in VC funding.”

In further analysis, Linghang found that incumbent firms experience lower growth of high-skilled employment and a higher departure rate among patent inventors. Incumbent firms also cut research and development and generate lower-quality innovation. “Overall, my results highlight that VC investment inflows, through competition for talent, can have distributional effects on workers and adverse consequences for some local incumbent firms,” says Linghang.

Linghang was given the award during the NFA annual conference in Vancouver. Dr. Andriy Shkilko (Canada Research Chair) presented the award on behalf of the Lazaridis Institute.

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