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Reconceptualizing Entrepreneurial Exit: Divergent Exit Routes and Their Drivers

Author

Listed:
  • Wennberg, Karl

    () (Dept. of Business Administration, Stockholm School of Economics)

  • Wiklund, Johan

    () (Whitman School of Management)

  • DeTienne, Dawn

    () (Colorado State University)

  • Cardon, Melissa

    () (Pace University)

Abstract

We develop a conceptual model of entrepreneurial exit which includes exit through liquidation and firm sale for both firms in financial distress and firms performing well. This represents four distinct exit routes. In developing the model, we complement the prevailing theoretical framework of exit as a utility-maximizing problem among entrepreneurs with prospect theory and its recent applications in liquidation of investment decisions. We empirically test the model using two Swedish databases which follow 1,735 new ventures and their founders over eight years. We find that entrepreneurs exit from both firms in financial distress and firms performing well. In addition, commonly examined human capital factors (entrepreneurial experience, age, education) and failure-avoidance strategies (outside job, reinvestment) differ substantially across the four exit routes, explaining some of the discrepancies in earlier studies

Suggested Citation

  • Wennberg, Karl & Wiklund, Johan & DeTienne, Dawn & Cardon, Melissa, 2009. "Reconceptualizing Entrepreneurial Exit: Divergent Exit Routes and Their Drivers," SSE/EFI Working Paper Series in Business Administration 2009:10, Stockholm School of Economics.
  • Handle: RePEc:hhb:hastba:2009_010
    Note: Forthcoming, Journal of Business Venturing
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    References listed on IDEAS

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    Keywords

    Entrepreneurial Exit; Prospect Theory; Human Capital;

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