Entrepreneurial exit in real and imagined markets

Entrepreneurs exit their business due to selection pressures experienced in the market place, i.e. business failure. Next to this well known ex-post decision to exit, entrepreneurs select exantewhether they are willing to pursue an entrepreneurial career at all, or to give up theseentrepreneurial intentions. Hardly anything is known about the latter selection process in imagined markets that precedes the variety creation and selection process in real markets. This paper explores and explains the prevalence of these two selection processes using survey data on 20,000 individuals in 27 European countries and the US in 2007. We distinguish business failures from exit by sell-off. Results indicate that individuals in the US are less likely to exit imagined markets, and are more likely to have exited the real market (especially by selling their business) than Europeans. Individuals in a Corporatist welfare state regime have relatively high chances to exit imagined markets. Business owners in urban environments are more likely to fail, while individuals with a high risk tolerance, a high education and self-employed parents are less likely to exit in imagined as well as in real markets (via business failure). This study shows that exit in real and in imagined markets is differently affected by competition and institutions. These selection environments have differential effects on entrepreneurial aspirations and actions of individuals, and provide evidence for the dissimilar nature of exit in real and exit in imagined markets.