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The fallacy of "only the strong survive": The effects of extrinsic motivation on the persistence decisions for under-performing firms

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  • DeTienne, Dawn R.
  • Shepherd, Dean A.
  • De Castro, Julio O.
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    Abstract

    Under-performing firms persist even though existing theoretical perspectives indicate that they should be selected out of the market. Building upon threshold theory [Gimeno, J., Folta, T., Cooper, A., Woo, C., 1997. Survival of the fittest? Entrepreneurial human capital and the persistence of underperforming firms. Administrative Science Quarterly 42, 750-783.] and using Staw's [Staw, B.M., 1981. The escalation of commitment to a course of action. Academy of Management Review 6 (4), 577-587.] theoretical model of commitment to a course of action, we explore and test the factors that lead entrepreneurs to persist with under-performing firms. We found environmental munificence, personal investment, personal options, previous organizational success, and perceived collective efficacy impact the decision to persist with an under-performing firm. In addition, extrinsic motivation moderates those relationships. This research adds to the growing literature on highly persistent, under-performing firms and complements and extends threshold theory.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Business Venturing.

    Volume (Year): 23 (2008)
    Issue (Month): 5 (September)
    Pages: 528-546

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    Handle: RePEc:eee:jbvent:v:23:y:2008:i:5:p:528-546

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    Web page: http://www.elsevier.com/locate/jbusvent

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    Cited by:
    1. Coad, Alex & Frankish, Julian & Roberts, Richard G. & Storey, David J., 2013. "Growth paths and survival chances: An application of Gambler's Ruin theory," Journal of Business Venturing, Elsevier, vol. 28(5), pages 615-632.
    2. Astrachan, Joseph H., 2010. "Strategy in family business: Toward a multidimensional research agenda," Journal of Family Business Strategy, Elsevier, vol. 1(1), pages 6-14, March.
    3. Pieper, Torsten M., 2010. "Non solus: Toward a psychology of family business," Journal of Family Business Strategy, Elsevier, vol. 1(1), pages 26-39, March.
    4. Diana Hechavarria & Maija Renko & Charles Matthews, 2012. "The nascent entrepreneurship hub: goals, entrepreneurial self-efficacy and start-up outcomes," Small Business Economics, Springer, Springer, vol. 39(3), pages 685-701, October.
    5. Hanisch, David N. & Rau, Sabine B., 2014. "Application of metric conjoint analysis in family business research," Journal of Family Business Strategy, Elsevier, vol. 5(1), pages 72-84.
    6. Per Davidsson & Scott Gordon, 2012. "Panel studies of new venture creation: a methods-focused review and suggestions for future research," Small Business Economics, Springer, Springer, vol. 39(4), pages 853-876, November.
    7. Woods, Jeremy A. & Dalziel, Thomas & Barton, Sidney L., 2012. "Escalation of commitment in private family businesses: The influence of outside board members," Journal of Family Business Strategy, Elsevier, vol. 3(1), pages 18-27.
    8. Dunkelberg, William & Moore, Carmen & Scott, Jonathan & Stull, William, 2013. "Do entrepreneurial goals matter? Resource allocation in new owner-managed firms," Journal of Business Venturing, Elsevier, vol. 28(2), pages 225-240.
    9. McCann, Brian T. & Folta, Timothy B., 2012. "Entrepreneurial entry thresholds," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 84(3), pages 782-800.

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