Committed to the venture or the family? A study of entrepreneurial persistence in distressed ventures

Abstract

The entrepreneurial journey is a complex and challenging process, and many entrepreneurs experience venture distress, i.e., they realize that their venture is underperforming based on the threshold they had set for it. While it is generally acknowledged that distressed ventures should be exited, preferably as fast as possible, many entrepreneurs face difficulties in letting go of the venture they are often so committed to. Building on embeddedness and escalation of commitment, this study investigates under which conditions entrepreneurs are more or less likely to persist with their distressed venture. In particular, it assesses the impact of internal and external venture stakeholders on entrepreneurial persistence and the extent to which family factors mitigate these relationships. To do so, the study uses a sample of 231 entrepreneurs in Belgium who called upon help from a support agency for distressed ventures in 2016. We find that persistence is particularly strong for entrepreneurs of ventures with (more) employees and with lower levels of operating debts. As the venture’s level of operating debts increases, the probability of persistence decreases for entrepreneurs with no alternative family income and with dependents in the family household. We discuss implications for theory and practice. Plain English Summary Entrepreneurs often persist with a distressed venture, especially when having (more) employees and lower operating debts. Yet, in the presence of increasing operating debts and dependents requiring household income, venture exit becomes more likely. Entrepreneurs’ persistence with their distressed ventures thus seems to be driven by their commitment toward venture stakeholders (such as employees and creditors), one the one hand, and their family household, on the other hand. These insights into when and why entrepreneurs in distress are more or less likely to persist enable business advisors and policy makers to better understand and support the needs of these entrepreneurs. In addition, this study advances academic knowledge on a highly prevalent yet understudied phenomenon in entrepreneurship, namely venture distress.