Reconceptualizing entrepreneurial exit: Divergent exit routes and their drivers

Karl Wennberg, Johan Wiklund, Dawn R. DeTienne, Melissa S. Cardon

Research output: Contribution to journalArticle

223 Scopus citations

Abstract

We develop a conceptual model of entrepreneurial exit which includes exit through liquidation and firm sale for both firms in financial distress and firms performing well. This represents four distinct exit routes. In developing the model, we complement the prevailing theoretical framework of exit as a utility-maximizing problem among entrepreneurs with prospect theory and its recent applications in liquidation of investment decisions. We empirically test the model using two Swedish databases which follow 1,735 new ventures and their founders over eight years. We find that entrepreneurs exit from both firms in financial distress and firms performing well. In addition, commonly examined human capital factors (entrepreneurial experience, age, education) and failure-avoidance strategies (outside job, reinvestment) differ substantially across the four exit routes, explaining some of the discrepancies in earlier studies.

Original languageEnglish (US)
Pages (from-to)361-375
Number of pages15
JournalJournal of Business Venturing
Volume25
Issue number4
DOIs
StatePublished - Jul 1 2010
Externally publishedYes

Keywords

  • Entrepreneurial exit
  • Human capital
  • Prospect theory

ASJC Scopus subject areas

  • Business and International Management
  • Management of Technology and Innovation

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