Learning to let go: A field experiment on benchmarking and entrepreneur exit

Abstract

Entrepreneurs are reluctant to exit. How does information about peers, specifically, benchmarking, affect exit? To investigate this question, we carried out a randomized controlled trial of benchmarking among 194 food-stall owners in Singapore. Both control and treatment owners were informed of their own performance. Additionally, treatment owners were informed of their relative performance and best practices. The benchmarking treatment induced owners to exit, especially worse-performing owners and business founders. We interpreted the mechanism as being either resolving uncertainty over own ability or correcting escalation of commitment.

Keywords: Business exit; Entrepreneurship; Benchmarking; Field experiment; Peer learning

JEL Classification: L26