Abstract

In this paper, we introduce an additional reason for new venture failure that has been given little attention in the literature; liquidity problems that arise when new ventures ‘take off ’ and enter a phase of exponential growth. We address this gap by integrating the more-recent research on new venture liability of newness (Shepherd, Douglas and Shanley, 2000; Wiklund, Baker, Shepherd, 2010) with the literature on new venture growth (Davidsson, Steffens and Fitzsimmons 2009). Drawing upon literature within financial accounting and research in marketing on new product diffusion patterns, our paper problematizes why seemingly successful new ventures might be suddenly blindsided by extreme liquidity problems and subsequently experience “death by success”.

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