The Causes of Early-Stage Entrepreneurial Discontinuance

Abstract

A high proportion of nascent entrepreneurs do not make it to an operational venture. Even though entrepreneurial exit decisions occur more frequently than many think, the literature on entrepreneurial discontinuance is not much developed. The paper first examines whether factors influencing early-stage discontinuance differ in the Czech Republic in comparison with Western countries. Second, it contributes to existing theories on nascent entrepreneurial activity of ""modest majority"" low-growth businesses by focusing on the role of expectations in discontinuance decisions. A sample of nascent entrepreneurs was interviewed in 2011 and then in two follow-up waves in 2012 and 2013. Building on hubris theory of entrepreneurship and theory of performance thresholds, the paper discusses subjective decision-making about entrepreneurial launch and exit. The results show that people with higher industry experience are more likely to discontinue from nascent entrepreneurship, a finding contrasting most research in Western countries. The paper also provides added value in relating growth aspirations to solo vs. team entrepreneurship. Solo entrepreneurs with high initial expectations were found more likely to discontinue from their efforts, whereas teams disbanded more often in case of low-ambition plans on new venture.