Scandinavian Working Papers in Economics
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The Economic Research Institute, Stockholm School of Economics SSE/EFI Working Paper Series in Business Administration

No 2009:10:
Reconceptualizing Entrepreneurial Exit: Divergent Exit Routes and Their Drivers

Karl Wennberg (), Johan Wiklund (), Dawn DeTienne () and Melissa Cardon ()

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

Keywords: Entrepreneurial Exit; Prospect Theory; Human Capital; (follow links to similar papers)

41 pages, February 10, 2009

Forthcoming, Journal of Business Venturing

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This paper is forthcoming as:
Wennberg, Karl, Johan Wiklund, Dawn DeTienne and Melissa Cardon, 'Reconceptualizing Entrepreneurial Exit: Divergent Exit Routes and Their Drivers', Journal of Business Venturing.

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