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Variable Risk Preferences in New Firm Growth and Survival

Author

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  • Wennberg, Karl

    () (The Ratio Institute)

  • Delmar, Frédéric

    () (Lund University)

  • McKelvie, Alexander

    () (Syracuse university)

Abstract

We outline and test a decision-making theory of new venture growth and survival. Building upon research in entrepreneurship and decision making under risk, we hypothesize that entrepreneurs’ attention to survival and aspiration reference points changes based on venture age (¬experience-based learning), size (differences in decision complexity¬), and performance decision domain. Examining a panel of 14,760 new ventures in the professional services sector, our findings show how risk preferences change as a venture ages and increases in size. This approach offers a more nuanced view of decision making under risk and provides a theoretical explanation for the common patterns of new ventures’ probability of exit and growth diminishing with age and size.

Suggested Citation

  • Wennberg, Karl & Delmar, Frédéric & McKelvie, Alexander, 2016. "Variable Risk Preferences in New Firm Growth and Survival," Ratio Working Papers 272, The Ratio Institute.
  • Handle: RePEc:hhs:ratioi:0272
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    Cited by:

    1. repec:bbn:journl:2017_3_2_zuba is not listed on IDEAS
    2. Ornella Wanda Maietta & Fernanda Mazzotta, 2018. "Firm Survival and Innovation: Knowledge Context Matters!," CSEF Working Papers 496, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    3. repec:gam:jsusta:v:9:y:2017:i:12:p:2265-:d:122052 is not listed on IDEAS
    4. repec:bbn:journl:2017_3_3_lupu is not listed on IDEAS
    5. repec:kap:sbusec:v:49:y:2017:i:4:d:10.1007_s11187-017-9857-7 is not listed on IDEAS
    6. Siepel, Josh & Cowling, Marc & Coad, Alex, 2017. "Non-founder human capital and the long-run growth and survival of high-tech ventures," Technovation, Elsevier, vol. 59(C), pages 34-43.
    7. repec:eee:jbvent:v:34:y:2019:i:1:p:122-140 is not listed on IDEAS
    8. repec:eee:jbvent:v:34:y:2019:i:1:p:80-102 is not listed on IDEAS
    9. repec:bbn:journl:2017_3_4_pop is not listed on IDEAS
    10. repec:kap:sbusec:v:50:y:2018:i:3:d:10.1007_s11187-017-9909-z is not listed on IDEAS
    11. repec:bbn:journl:2017_3_1_negrusa is not listed on IDEAS

    More about this item

    Keywords

    Growth; Survival; Aspiration levels; Focus of attention; New ventures; Risk preferences;

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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