Abstract
Failure is a crucial event that can occur at any time during the entrepreneurial/start-up process. Understanding what influences the failure or survival of new ventures is increasingly attracting the interest of scholars, practitioners, and policymakers, mainly because of the role that startups play in innovation. Studying failure events presents a series of challenges that scholars should bear in mind when approaching this topic, starting from the definition of terms to the lack of data to analyze such events. The literature on business failures is scattered among different fields of research and lacks a comprehensive framework. We address this gap performing a systematic literature review. 74 papers focusing on new ventures’ failure have been reviewed and analyzed to identify the main causes of failure. In doing so, we identify four main categories of causes of new venture failure. Namely, I) resources, with a specific focus on human and financial capital; II) strategic/managerial decisions; III) product-related aspects; and IV) contextual/environmental-related issues. By providing an up-to-date systematization of recently published contributions on the topic, we aim to provide practical implications for entrepreneurs/practitioners and future research directions to researchers in the field.
Highlights
Starting a new business is a high-risk activity
The paper is structured as follows: first, we describe the research methodology; we present and discuss the main findings emerging from the literature review; we conclude with future research directions to advance the understanding of failure with specific reference to the domain of new venture research
An initial literature review of the selected contributions reveals that research on new venture failures could be divided mainly into three streams of research: i) the ones devoted to defining this event and its peculiarities; ii) the ones seeking to develop models to predict failure; and iii) the ones investigating causes of failure or - as a reflection – factors influencing startup survival
Summary
Starting a new business is a high-risk activity. A startup could be defined as “a temporary organization used to search for a repeatable and scalable business model” (Blank2, 2013a, 2013b), “designed to grow fast” (Graham3, 2001, 2012), and delivering “a new product or service under conditions of extreme uncertainty” (Ries4, 2011). Startups are subject to the liability of newness, i.e., the higher the degree of novelty, the higher the mortality risk (Aldrich & Yang, 2012; Guercini & Milanesi, 2016; Shepherd, Douglas, & Shanley, 2000; Yang & Aldrich, 2012). In this respect, failure is a crucial event that may occur at any time during the entrepreneurial/start-up process (Blank, 2011; Khelil, 2016; Pisoni & Onetti, 2018; Triebel, Schikora, Graske, & Sopper, 2018). There is a series of elements that should be carefully taken into account when approaching this topic
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