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Can Entrepreneurs Who Experienced Business Closure Bring Their New Start-Up to a Successful M&A?

Author

Listed:
  • Shai Harel

    (Entrepreneurship Department, Coller School of Management, Tel Aviv University, Tel Aviv POB 6997801, Israel)

  • Eliran Solodoha

    (The Department of Management, The Guilford Glazer Faculty of Business and Management, Ben-Gurion University of the Negev, POB 653, Beer Sheva 8410501, Israel)

  • Stav Rosenzweig

    (The Department of Management, The Guilford Glazer Faculty of Business and Management, Ben-Gurion University of the Negev, POB 653, Beer Sheva 8410501, Israel)

Abstract

Numerous technology start-ups end up shutting down their operations. The present study aims to answer the following research questions: can entrepreneurs who closed their previous ventures bring their new venture to a successful exit through M&A and to what extent does this positive outcome correspond to whether investors funded their start-up? We examine 9723 technology start-ups established by 19,458 entrepreneurs. About half of the start-ups were funded, and 3463 of them had entrepreneurs with closure or with M&A experience. We find that entrepreneurs with closure experience are negatively associated with the probability of M&A as a main effect, in line with the theory that indicates imprinting. Nevertheless, entrepreneurs with closure experience are positively associated with the probability of M&A when their co-founders have M&A experience. We suggest that entrepreneurs with closure experience can compensate for their lack of M&A experience by learning from their peers who possess this experience. We discuss implications for theory, investors, and entrepreneurs.

Suggested Citation

  • Shai Harel & Eliran Solodoha & Stav Rosenzweig, 2022. "Can Entrepreneurs Who Experienced Business Closure Bring Their New Start-Up to a Successful M&A?," JRFM, MDPI, vol. 15(9), pages 1-17, August.
    • Handle: RePEc:gam:jjrfmx:v:15:y:2022:i:9:p:386-:d:900969
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    References listed on IDEAS

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    Cited by:

    1. Solodoha, Eliran & Rosenzweig, Stav & Harel, Shai, 2023. "Incentivizing angels to invest in start-ups: Evidence from a natural experiment," Research Policy, Elsevier, vol. 52(1).

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