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Another unconsidered sinister effect of indusrty-specific crises? On the possible emergence of adverse selection phenomena on the survival of entrepreneurial ventures

Author

Listed:
  • stefano Colombo

    (DISCE, Università Cattolica)

  • Luca Grilli

    (Department of Mangement, Economics and Industrial Engineering-Politecnico di Milano)

Abstract

This article explores the possibility that under an intensely negative industry-specific shock, the commonly detected positive relationship between the human capital of founders and the survival prospects of start-up businesses may actually be reversed. Starting from an analysis of the issue from a theoretical perspective in order to derive the necessary and sufficient conditions for the emergence of these adverse selection phenomena in entrepreneurship, the study examines a sample of 179 Italian start-ups operating in the ICT services market created during the boom period from 1995 to early 2000. Econometric analyses provide evidence that, during an intense industry crisis (i.e., early 2000 to 2003), entrepreneurs with a substantial amount of human capital may pursue an exit strategy.

Suggested Citation

  • stefano Colombo & Luca Grilli, 2010. "Another unconsidered sinister effect of indusrty-specific crises? On the possible emergence of adverse selection phenomena on the survival of entrepreneurial ventures," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0098, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    • Handle: RePEc:ctc:serie3:ief0098
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    File URL: http://www.unicatt.it/Istituti/EconomiaFinanza/Quaderni/ief0098.pdf
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    References listed on IDEAS

    as
    1. Astebro, Thomas & Bernhardt, Irwin, 2003. "Start-up financing, owner characteristics, and survival," Journal of Economics and Business, Elsevier, vol. 55(4), pages 303-319.
    2. C. Mirjam van Praag, 2003. "Business Survival and Success of Young Small Business Owners," Tinbergen Institute Discussion Papers 03-050/3, Tinbergen Institute.
    3. Silviano Pérez & Amparo Llopis & Juan Llopis, 2004. "The Determinants of Survival of Spanish Manufacturing Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 25(3), pages 251-273, August.
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    Cited by:

    1. Giuseppe Mastromatteo, 2011. "The Debate on the Crisis: Recent Reappraisals of the Concept of Functional Finance," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0105, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
    2. Giuseppe Mastromatteo, 2011. "H.P. Minsky And Policies To Countervail Crises," DISCE - Quaderni dell'Istituto di Economia e Finanza ief0102, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).

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    More about this item

    Keywords

    High-tech entrepreneurship; Adverse selection; Industry crises.;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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