Abstract

While much attention is devoted to studying about the market entry decisions (e.g., starting up a business) very little is known empirically about the market exit decisions (e.g., closing down a business) especially in the context of failure (Khavul et al., 2009). To the extent that such exit research exists, studies have primarily focused on economic barriers and strategic factors (Covin & Slevin, 1990).

In this study, we investigate behavioral factors that affect entrepreneur’s decision to exit. More specifically, drawing on the escalation of commitment literature, we focus on factors that influence entrepreneurs to delay their exit decision during a failing course of action – time taken from when they initially decide to exit until they actually exit. An orderly and timely exit is important since it ultimately determines the total cost of failure. What impacts the extent to which entrepreneurs persist on a failing course of action in the form of delaying their time to exit? More importantly, under what conditions are entrepreneurs able to de-bias their escalation of commitment in the context of exit?

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