THE IMPACT OF DIGITAL REVOLUTION ON ENTREPRENEURSHIP AND FINANCIAL SERVICES

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In this dissertation, I study how the recent emergence of new technology innovations affects entrepreneurship and financial services industry, affecting the value creation mechanisms. More specifically, I study how the Fintech initiatives, leveraging on innovation, disintermediate traditional organizations such as financial institutions, leading to the emergence of alternative financing for business initiatives, or collaborate with them, leading to the creation of new business models. The first paper aims to increase our theoretical understanding of the driving forces behind the success and volatility of digital currencies. More specifically, I demonstrate that the success and volatility of digital currencies depends on their business type and on their technology type. I find strong complementarities between digital currencies that are related to a platform business model and are based on their own blockchain technology, which make them to outperform others over time on several value dimensions. In the second paper I argue, and empirically show, that the entry of digital platforms into the financial industry acts as a trigger for the incumbents’ business model transformation. There is a connection between resource (mis)allocation and the market value of diversified firms, and this issue have been greatly studied in banking literature: despite expected benefits from economies of scope the literature suggests and largely show a diversification discount. What is pretty new is that I argue that the complementarities that arise should not be seen on the basis of classic management literature (supply side) but on the basis of the network effects. Through a demand perspective the investment in the Fintech business create value for the users, that’s why I will expect a diversification premium, rather than a discount. My results confirm that diversified firms trade at discounts compared to a portfolio of comparable single segments, if is adopted an asset perspective, while using an income- based approach the diversification conducts to a premium. Moreover, I argue that, if financial conglomerates diversify their activities into FinTech businesses, the results change, or at least are moderated. The market attributes value to the growth opportunities and the risk reduction associated with Fintech, and rewards financial institutions that are transforming themselves into platform-based, digital banking ecosystems. In the last chapter of this thesis I move to the concepts of price and value, to test if the market methods, after the financial crisis, are reliable to estimate companies’ value. It is a widespread belief that the free negotiation of shares in financial markets originates prices that correctly represent, at least in terms of trends, the value of companies. In fact, analysts and practitioners, through so-called "multipliers", determine the value of the companies according to parameters in significant part related to prices marked by other securities companies, deemed "comparables". This paper aims to show that only criteria solidly based on the analysis of fundamentals and scenario, sector and business perspectives, can correctly lead to full appreciation of value. Through an empirical analysis with an international focus I also highlight that liquidity and governance affects the value of the multipliers, leading to misvaluation of companies in some unsubstantiated cases.