Weekly Top 5 Papers – January 28, 2019

1. Big Other: Surveillance Capitalism and the Prospects of an Information Civilizationby Shoshana Zuboff (Berkman Center for Internet & Society)

2. New Venture Creation: Controversial Perspectives and Theories by
Aidin Salamzadeh (University of Tehran – Faculty of Entrepreneurship)

Startups are temporary organizations which follow a scalable, repeatable and profitable business model. Although these entities have been studied in the literature since the early 1980s, more attention has been paid to them in the last decade. Despite this fact, relatively few investigations have been done to investigate their evolution. Thus, this paper attempts to develop a more comprehensive and comprehensible framework for startup (new venture) creation. The resultant framework suggests that the creation of a startup involves the identification of an idea or opportunity by an entrepreneur who subsequently organizes a series of activities, mobilizes resources and creates competence using his/her networks in an environment in order to create value. It sheds light on the startup (new venture) creation process and has relevance for entrepreneurs, policymakers and researchers. 

I hope that this framework may be useful to anyone who wants to know about the evolution of startups and the critical issues these entities need to be aware of. In addition to this, it provides policymakers with more precise information on how the policy measures might work and whether changes are required to support startups. Scholars could also take advantage of the proposed framework in order to study the evolution of typical startups in different contexts. Aidin Salamzadeh

3. LEGO – The Toy of Smart Investors by Victoria Dobrynskaya (National Research University Higher School of Economics) and Julia Kishilova (RB Partners)

In this paper we study a new alternative investment asset – LEGO sets. LEGO is an iconic toy with diminishing over time supply and a high collectable value. A huge secondary market for LEGO sets with tens of thousands of transactions per day has developed since the turn of the century. We find that LEGO investments, which are kept in sealed boxes, outperform large stocks, bonds, gold and other alternative investments, yielding the average return of at least 11% (8% in real terms) in the sample period 1987-2015. Small and huge sets, as well as seasonal, architectural and movie-based sets, deliver higher returns. LEGO returns are not exposed to market, value, momentum and volatility risk factors, but have an almost unit exposure to the size factor. A positive multifactor alpha of 4-5%, a Sharpe ratio of 0.4, a positive return skewness and a low exposure to standard risk factors make the LEGO toy an attractive alternative investment with a good diversification potential.

All that said, this does not mean that you should rush to buy LEGO sets instead of investing in stocks or other traditional assets. We have received numerous questions from journalists whether investors should turn from stocks to LEGO or buy LEGO for retirement. I would answer with a caution. The LEGO secondary market is much less liquid compared to the securities market, and storing a large number of LEGO sets is associated with costs. Moreover, without a special knowledge in this industry, it is difficult to guess which sets will outperform others in the next years. We study 2,300 sets and we do find high average returns and outrageous returns on particular sets. However, some sets have deteriorated in value. It is difficult to pick the right sets without knowing the specifics of the demand for this toy (e.g. rare minifigures or details, high value for LEGO collectors or artists). Investment in LEGO, similarly to investment in traditional assets, requires knowledge and constant monitoring of the industry. Without this, a diversified portfolio would help, but storing such a portfolio is rather costly. So, LEGO can be viewed as an attractive asset for diversification of your stock portfolio, and it is a great investment toy for LEGO fans, who generate utility not only from their wealth, but also from the toy itself. This is why it is called a ‘hobby investment’ or ‘investment of passion’!

– Victoria Dobrynskaya

4. New Venture Creation: How Start-Ups Grow? by Aidin Salamzadeh (University of Tehran – Faculty of Entrepreneurship) and David A. Kirby (University of Surrey – School of Management)

5. Rentabilidad de los Fondos de Pensiones en España. 2003-2018 (Return of Pension Funds in Spain. 2003-2018) by Pablo Fernandez (University of Navarra – IESE Business School)

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