Variable Risk Preferences in New Firm Growth and Survival

50 Pages Posted: 1 Nov 2016

See all articles by Karl Wennberg

Karl Wennberg

Linkoping University - Institute for Analytical Sociology (IAS)

Frédéric Delmar

Lund University School of Economics and Management; EM Lyon (Ecole de Management de Lyon); Research Institute of Industrial Economics (IFN)

Alexander McKelvie

Syracuse University - Whitman School of Management

Date Written: June 1, 2016

Abstract

We outline and test a decision-making theory of new venture growth and survival. Building upon research in entrepreneurship and decision making under risk, we hypothesize that entrepreneurs’ attention to survival and aspiration reference points changes based on venture age (experience-based learning), size (differences in decision complexity), and performance decision domain. Examining a panel of 14,760 new ventures in the professional services sector, our findings show how risk preferences change as a venture ages and increases in size. This approach offers a more nuanced view of decision making under risk and provides a theoretical explanation for the common patterns of new ventures’ probability of exit and growth diminishing with age and size.

Keywords: Growth, Survival, Aspiration levels, Focus of attention, New ventures, Risk

JEL Classification: L26, M13

Suggested Citation

Wennberg, Karl and Delmar, Frédéric and McKelvie, Alexander, Variable Risk Preferences in New Firm Growth and Survival (June 1, 2016). Journal of Business Venturing, Vol. 31, No. 4, 2016. Available at SSRN: https://ssrn.com/abstract=2862351

Karl Wennberg (Contact Author)

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

Norrköping, 601 74
Sweden

Frédéric Delmar

Lund University School of Economics and Management ( email )

P.O Box 7080
Lund
Sweden

EM Lyon (Ecole de Management de Lyon) ( email )

23 Avenue Guy de Collongue
Lyon, Ecully 69134
France
+33 (0)4 78 33 70 18 (Phone)

HOME PAGE: http://www.em-lyon.com/france/professeurs/delmar/index.aspx

Research Institute of Industrial Economics (IFN)

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Alexander McKelvie

Syracuse University - Whitman School of Management ( email )

721 University Avenue
Syracuse, NY 13244-2130
United States

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