Defense Date

Winter 1-24-2019

Degree Type





Business Administration

Chair or Co-Chair

Dr. Jennifer Schafer

Committee Member or Co-Chair

Dr. Diana Falsetta


Dr. Dana Hermanson


Equity-investment credits are prevalent in the United States and other countries (Bell and Woodmansee, 2016), yet little evidence exists about the effectiveness of these credits at incentivizing individuals to invest. The intent of these credits is to spur entrepreneurial activity and in turn economic development (Acs, Asterbro, Audretsch, and Robinson, 2016; Bell, Wilbanks, and Hendon, 2013; Erken, Donselaar, and Thurik, 2016). The current study experimentally tests the influence of a tax credit on an individual’s likelihood to invest in startups across two risk settings, which parallel Angel and Crowdfunding investing methods.

The study finds an equity-investment tax credit is effective at incentivizing investors to make risky capital investments in startups when the nature of risk for the investing method is characterized by low market-risk and high agency-risk, parallel to Crowdfunding. Notwithstanding the tax credit, individuals are more likely to invest when market risk is high and agency risk is low (parallel to Angel investing). The level of net-worth of the individual (low vs. high) did not influence the effectiveness of the credit. Yet, low net-worth individuals are more likely to invest overall. These results indicate that current investment tax credit programs, which target Angel investing, may not be necessary to incentivize investors. Instead, tax credit programs may be more effective if they are adapted to align with 2016 Crowdfunding regulation to incentivize investments in startups characterized by low market risk and high agency risk.

Available for download on Thursday, March 28, 2024