IDEAS home Printed from https://ideas.repec.org/a/taf/indinn/v24y2017i2p97-121.html
   My bibliography  Save this article

Should I stay or should I go? Founder’s decision to leave an entrepreneurial venture during an industrial crisis

Author

Listed:
  • Stefano Colombo
  • Luca Grilli

Abstract

We investigate if while experiencing an intensely negative industry-specific shock, skilled entrepreneurs may decide to leave the firm they founded, whereas founders who are less endowed with human capital may decide to continue their activity. Developing a stylised theoretical framework of the issue intended to derive the necessary and sufficient conditions for the emergence of this phenomenon, this study explores its occurrence in Italy during the ICT industry crisis from early 2000–2003 by analysing the individual stay/leave decision of a sample of 201 founders of 79 start-ups operating in the ICT services market.

Suggested Citation

  • Stefano Colombo & Luca Grilli, 2017. "Should I stay or should I go? Founder’s decision to leave an entrepreneurial venture during an industrial crisis," Industry and Innovation, Taylor & Francis Journals, vol. 24(2), pages 97-121, February.
    • Handle: RePEc:taf:indinn:v:24:y:2017:i:2:p:97-121
    DOI: 10.1080/13662716.2016.1216395
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/13662716.2016.1216395
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13662716.2016.1216395?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Bresnahan, Timothy F. & Trajtenberg, M., 1995. "General purpose technologies 'Engines of growth'?," Journal of Econometrics, Elsevier, vol. 65(1), pages 83-108, January.
    2. Peter Thompson, 2005. "Selection and Firm Survival: Evidence from the Shipbuilding Industry, 1825-1914," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 26-36, February.
    3. Mata, Jose & Portugal, Pedro & Guimaraes, Paulo, 1995. "The survival of new plants: Start-up conditions and post-entry evolution," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 459-481, December.
    4. Paglin, Morton & Rufolo, Anthony M, 1990. "Heterogeneous Human Capital, Occupational Choice, and Male-Female Earnings Differences," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 123-144, January.
    5. Cressy, Robert, 1996. "Are Business Startups Debt-Rationed?," Economic Journal, Royal Economic Society, vol. 106(438), pages 1253-1270, September.
    6. Jovanovic, Boyan & MacDonald, Glenn M, 1994. "The Life Cycle of a Competitive Industry," Journal of Political Economy, University of Chicago Press, vol. 102(2), pages 322-347, April.
    7. Massimo G. Colombo & Luca Grilli, 2013. "The Creation of A Middle‐Management Level by Entrepreneurial Ventures: Testing Economic Theories of Organizational Design," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(2), pages 390-422, June.
    8. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(1), pages 53-82.
    9. Thomas Hellmann & Manju Puri, 2002. "Venture Capital and the Professionalization of Start‐Up Firms: Empirical Evidence," Journal of Finance, American Finance Association, vol. 57(1), pages 169-197, February.
    10. Holmes, Thomas J & Schmitz, James A, Jr, 1995. "On the Turnover of Business Firms and Business Managers," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1005-1038, October.
    11. Hongbin Li & Lingsheng Meng & Junsen Zhang, 2006. "Why Do Entrepreneurs Enter Politics? Evidence from China," Economic Inquiry, Western Economic Association International, vol. 44(3), pages 559-578, July.
    12. Schäfer, Dorothea & Werwatz, Axel & Zimmermann, Volker, 2004. "The Determinants of Debt and (Private) Equity Financing : The Case of Young, Innovative SMEs from Germany," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 11(3), pages 225-248.
    13. Wennberg, Karl & Wiklund, Johan & DeTienne, Dawn R. & Cardon, Melissa S., 2010. "Reconceptualizing entrepreneurial exit: Divergent exit routes and their drivers," Journal of Business Venturing, Elsevier, vol. 25(4), pages 361-375, July.
    14. Cooper, Arnold C. & Bruno, Albert V., 1977. "Success among high-technology firms," Business Horizons, Elsevier, vol. 20(2), pages 16-22, April.
    15. Holmes, Thomas J & Schmitz, James A, Jr, 1990. "A Theory of Entrepreneurship and Its Application to the Study of Business Transfers," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 265-294, April.
    16. Ashish Arora & Anand Nandkumar, 2011. "Cash-Out or Flameout! Opportunity Cost and Entrepreneurial Strategy: Theory, and Evidence from the Information Security Industry," Management Science, INFORMS, vol. 57(10), pages 1844-1860, October.
    17. Michael Dahl & Toke Reichstein, 2007. "Are You Experienced? Prior Experience and the Survival of New Organizations," Industry and Innovation, Taylor & Francis Journals, vol. 14(5), pages 497-511.
    18. Colombo, Massimo G. & Grilli, Luca, 2010. "On growth drivers of high-tech start-ups: Exploring the role of founders' human capital and venture capital," Journal of Business Venturing, Elsevier, vol. 25(6), pages 610-626, November.
    19. Unger, Jens M. & Rauch, Andreas & Frese, Michael & Rosenbusch, Nina, 2011. "Human capital and entrepreneurial success: A meta-analytical review," Journal of Business Venturing, Elsevier, vol. 26(3), pages 341-358, May.
    20. Scott Shane & Toby Stuart, 2002. "Organizational Endowments and the Performance of University Start-ups," Management Science, INFORMS, vol. 48(1), pages 154-170, January.
    21. Martin Fransman, 2004. "The telecoms boom and bust 1996-2003 and the role of financial markets," Journal of Evolutionary Economics, Springer, vol. 14(4), pages 369-406, October.
    22. Colombo, Massimo G. & Grilli, Luca, 2005. "Founders' human capital and the growth of new technology-based firms: A competence-based view," Research Policy, Elsevier, vol. 34(6), pages 795-816, August.
    23. Massimo G. Colombo & Marco Delmastro, 2004. "Delegation of Authority In Business Organizations: An Empirical Test," Journal of Industrial Economics, Wiley Blackwell, vol. 52(1), pages 53-80, March.
    24. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    25. Erik Stam & Roy Thurik & Peter van der Zwan, 2010. "Entrepreneurial exit in real and imagined markets," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 19(4), pages 1109-1139, August.
    26. Dorothea Schäfer & Axel Werwatz & Volker Zimmermann, 2004. "The Determinants of Debt and (Private-) Equity Financing in Young Innovative SMEs: Evidence from Germany," Discussion Papers of DIW Berlin 411, DIW Berlin, German Institute for Economic Research.
    27. Michael R. Darby & Lynne G. Zucker, 2003. "Growing by Leaps and Inches: Creative Destruction, Real Cost Reduction, and Inching Up," Economic Inquiry, Western Economic Association International, vol. 41(1), pages 1-19, January.
    28. Amit, Raphael & Muller, Eitan & Cockburn, Iain, 1995. "Opportunity costs and entrepreneurial activity," Journal of Business Venturing, Elsevier, vol. 10(2), pages 95-106, March.
    29. Enrico Santarelli & Marco Vivarelli, 2007. "Entrepreneurship and the process of firms’ entry, survival and growth," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 16(3), pages 455-488, June.
    30. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-827, August.
    31. DeTienne, Dawn R. & Shepherd, Dean A. & De Castro, Julio O., 2008. "The fallacy of "only the strong survive": The effects of extrinsic motivation on the persistence decisions for under-performing firms," Journal of Business Venturing, Elsevier, vol. 23(5), pages 528-546, September.
    32. Gimmon, Eli & Levie, Jonathan, 2010. "Founder's human capital, external investment, and the survival of new high-technology ventures," Research Policy, Elsevier, vol. 39(9), pages 1214-1226, November.
    33. Julia Schneider & Michael Dowling & Sumita Raghuram, 2007. "Empowerment as a success factor in start-up companies," Review of Managerial Science, Springer, vol. 1(2), pages 167-184, August.
    34. Davidsson, Per & Honig, Benson, 2003. "The role of social and human capital among nascent entrepreneurs," Journal of Business Venturing, Elsevier, vol. 18(3), pages 301-331, May.
    35. Colombo, Massimo G. & Delmastro, Marco & Grilli, Luca, 2004. "Entrepreneurs' human capital and the start-up size of new technology-based firms," International Journal of Industrial Organization, Elsevier, vol. 22(8-9), pages 1183-1211, November.
    36. Frédéric Delmar & Scott Shane, 2006. "Does Experience Matter? : The Effect of Founding Team Experience on the Survival and Sales of Newly Founded Ventures," Post-Print hal-02311638, HAL.
    37. Peter W. Roberts & Steven Klepper & Scott Hayward, 2011. "Founder backgrounds and the evolution of firm size," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 20(6), pages 1515-1538, December.
    38. Andrew Burke & Felix FitzRoy & Michael Nolan, 2008. "What makes a die-hard entrepreneur? Beyond the ‘employee or entrepreneur’ dichotomy," Small Business Economics, Springer, vol. 31(2), pages 93-115, August.
    39. Bates, Timothy, 1995. "Self-employment entry across industry groups," Journal of Business Venturing, Elsevier, vol. 10(2), pages 143-156, March.
    40. 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.
    41. Dorothea Schäfer & Oleksandr Talavera, 2009. "Small business survival and inheritance: evidence from Germany," Small Business Economics, Springer, vol. 32(1), pages 95-109, January.
    42. Barringer, Bruce R. & Jones, Foard F. & Neubaum, Donald O., 2005. "A quantitative content analysis of the characteristics of rapid-growth firms and their founders," Journal of Business Venturing, Elsevier, vol. 20(5), pages 663-687, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marco Vivarelli, 2013. "Is entrepreneurship necessarily good? Microeconomic evidence from developed and developing countries," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(6), pages 1453-1495, December.
    2. Ashish Arora & Anand Nandkumar, 2011. "Cash-Out or Flameout! Opportunity Cost and Entrepreneurial Strategy: Theory, and Evidence from the Information Security Industry," Management Science, INFORMS, vol. 57(10), pages 1844-1860, October.
    3. Vivarelli, Marco, 2012. "Drivers of entrepreneurship and post-entry performance : microeconomic evidence from advanced and developing countries," Policy Research Working Paper Series 6245, The World Bank.
    4. Ko, Eun-Jeong & McKelvie, Alexander, 2018. "Signaling for more money: The roles of founders' human capital and investor prominence in resource acquisition across different stages of firm development," Journal of Business Venturing, Elsevier, vol. 33(4), pages 438-454.
    5. Broström, Anders & Baltzopoulos, Apostolos, 2013. "Higher education experiences and new venture performance," Working Paper Series in Economics and Institutions of Innovation 321, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    6. Colombo, Massimo G. & Grilli, Luca, 2010. "On growth drivers of high-tech start-ups: Exploring the role of founders' human capital and venture capital," Journal of Business Venturing, Elsevier, vol. 25(6), pages 610-626, November.
    7. Masatoshi Kato & Yuji Honjo, 2015. "Entrepreneurial human capital and the survival of new firms in high- and low-tech sectors," Journal of Evolutionary Economics, Springer, vol. 25(5), pages 925-957, November.
    8. Giuseppe Criaco & Tommaso Minola & Pablo Migliorini & Christian Serarols-Tarrés, 2014. "“To have and have not”: founders’ human capital and university start-up survival," The Journal of Technology Transfer, Springer, vol. 39(4), pages 567-593, August.
    9. Vivarelli, Marco, 2012. "Entrepreneurship in Advanced and Developing Countries: A Microeconomic Perspective," IZA Discussion Papers 6513, Institute of Labor Economics (IZA).
    10. Erik Lundmark & Anna Krzeminska & Dean A. Shepherd, 2019. "Images of Entrepreneurship: Exploring Root Metaphors and Expanding Upon Them," Entrepreneurship Theory and Practice, , vol. 43(1), pages 138-170, January.
    11. Nigam, Nirjhar & Benetti, Cristiane & Johan, Sofia A., 2020. "Digital start-up access to venture capital financing: What signals quality?," Emerging Markets Review, Elsevier, vol. 45(C).
    12. Bertoni, Fabio & Colombo, Massimo G. & Grilli, Luca, 2011. "Venture capital financing and the growth of high-tech start-ups: Disentangling treatment from selection effects," Research Policy, Elsevier, vol. 40(7), pages 1028-1043, September.
    13. Enrico Santarelli & Marco Vivarelli, 2007. "Entrepreneurship and the process of firms’ entry, survival and growth," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 16(3), pages 455-488, June.
    14. Marco Vivarelli, 2012. "Entrepreneurship and Post-Entry Performance: the Microeconomic Evidence," DISCE - Quaderni del Dipartimento di Scienze Economiche e Sociali dises1286, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    15. Luca Grilli & Boris Mrkajic & Emanuele Giraudo, 2023. "Industrial policy, innovative entrepreneurship, and the human capital of founders," Small Business Economics, Springer, vol. 60(2), pages 707-728, February.
    16. Erik Stam & Roy Thurik & Peter van der Zwan, 2010. "Entrepreneurial exit in real and imagined markets," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 19(4), pages 1109-1139, August.
    17. Nuscheler, Daniela & Engelen, Andreas & Zahra, Shaker A., 2019. "The role of top management teams in transforming technology-based new ventures' product introductions into growth," Journal of Business Venturing, Elsevier, vol. 34(1), pages 122-140.
    18. Jolanda Hessels & Isabel Grilo & Roy Thurik & Peter Zwan, 2011. "Entrepreneurial exit and entrepreneurial engagement," Journal of Evolutionary Economics, Springer, vol. 21(3), pages 447-471, August.
    19. Alex Coad & Julian Frankish & Paul Nightingale & Richard Roberts, 2014. "Business experience and start-up size: Buying more lottery tickets next time around?," Small Business Economics, Springer, vol. 43(3), pages 529-547, October.
    20. Eriko Naiki & Yuta Ogane, 2022. "Human capital effects on fundraising for necessity- and opportunity-based entrepreneurs," Small Business Economics, Springer, vol. 59(2), pages 721-741, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:indinn:v:24:y:2017:i:2:p:97-121. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/CIAI20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.