While there is consensus among scientists about the importance of business formation on economic development, failure rates of newly founded enterprises are high. Attempts to study the causes of business failure are predominantly based on the ecological approach. Unfortunately, most of these studies investigated closure rates and firm dissolution without distinguishing appropriately between “successful” closure and failure. Studies addressing individual-level predictors of long-term success and failure of business ventures are comparably rare. Moreover, most of them used a limited timeframe, making it impossible to detect long-term effects.
We distinguished between long term success and venture failure, the latter referring to venture closure because of financial problems, such as insolvency. Our model developed here draws on the concept of uncertainty to explain long term outcomes of new business ventures. Specifically, the amount of perceived uncertainty (human capital), the willingness to bear uncertainty (risk-propensity), and the way in which owners specify challenges and unknown issues to manage uncertainty successfully (business planning) help managing uncertainty successfully and produce positive long-term consequences.
"PREDICTING LONG-TERM SURVIVAL CHANCES OF NEWLY FOUNDED BUSINESS VENTURES: BEARING UNCERTAINTY VERSUS MANAGING UNCERTAINTY (INTERACTIVE PAPER),"
Frontiers of Entrepreneurship Research: Vol. 29
, Article 22.
Available at: http://digitalknowledge.babson.edu/fer/vol29/iss5/22