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Reconceptualizing Entrepreneurial Exit: Divergent Exit Routes and Their Drivers

41 Pages Posted: 11 Feb 2009  

Karl Wennberg

Linkoping University - Institute for Analytical Sociology (IAS)

Johan Wiklund

Syracuse University

Dawn R. DeTienne

Colorado State University, Fort Collins - College of Business; Utah State University

Melissa S. Cardon

Pace University; Case Western Reserve University

Date Written: January 11, 2009

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

Keywords: Entrepreneurial Exit, Prospect Theory, Human Capital

JEL Classification: M13, J24, D81

Suggested Citation

Wennberg, Karl and Wiklund, Johan and DeTienne, Dawn R. and Cardon, Melissa S., Reconceptualizing Entrepreneurial Exit: Divergent Exit Routes and Their Drivers (January 11, 2009). Journal of Business Venturing, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1340886

Karl Wennberg (Contact Author)

Linkoping University - Institute for Analytical Sociology (IAS) ( email )

Norrköping, 601 74
Sweden

Johan Wiklund

Syracuse University ( email )

Whitman School of Management
720 University Avenue
Syracuse, NY 13244-2130
United States

Dawn R. DeTienne

Colorado State University, Fort Collins - College of Business ( email )

Fort Collins, CO 80523
United States

Utah State University

Logan, UT 84322
United States

Melissa S. Cardon

Pace University ( email )

One Pace Plaza
White Plains, NY New York 10603
United States

Case Western Reserve University

10900 Euclid Ave.
Cleveland, OH 44106
United States

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