Abstract

Entrepreneurial exit has emerged as a central topic in entrepreneurship research (DeTienne, McKelvie, and Chandler, 2015). Unlike recent exit studies of operating ventures (e.g., exits by IPO, M&A, bankruptcy, or liquidation) this study explores entrepreneurial exit by disengagement from the start-up process (Yusuf, 2012).

As nascent entrepreneurs gain more venture-specific experience, they could learn and refine their knowledge about the feasibility of new venture, and thus act on the feedback properly (McMullen and Shepherd, 2006). Such refinement of venture-specific knowledge can justify the disengagement decision and lead to timely strategic exit (Corbett and Hmieleski, 2007). However, prior research also suggests that an entrepreneur’s strong belief and escalating commitment may lead the entrepreneur to increase investments of time and money regardless of negative feedback from the marketplace (Guler, 2007). Prior sunk cost investments can strengthen a psychological barrier to exit (Khavul et al., 2011).

Our central prediction in this study is that an entrepreneur’s refinement of venture-specific knowledge would, somewhat counterintuitively, justify and increase the entrepreneur’s strategic exit whereas strong cognitive conviction would deter the decision to exit in a timely manner.

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