European Business Schools Librarian's Group

SSE/EFI Working Paper Series in Business Administration,
Stockholm School of Economics

No 2009:10: Reconceptualizing Entrepreneurial Exit: Divergent Exit Routes and Their Drivers

Karl Wennberg (), Johan Wiklund (), Dawn DeTienne () and Melissa Cardon ()
Additional contact information
Karl Wennberg: Dept. of Business Administration, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden
Johan Wiklund: Whitman School of Management, Postal: Whitman School of Management, Syracuse University, E-mail: jwiklund@syr.edu,
Dawn DeTienne: Colorado State University, Postal: 207 Rockwell Hall, Fort Collins, CO 80523, USA
Melissa Cardon: Pace University, Postal: Goldstein 227, Pleasantville NY 10570, USA

Abstract: We develop a conceptual model of entrepreneurial exit which includes exit through liquidation and firm sale for both firms in financial distress and firms performing well. This represents four distinct exit routes. In developing the model, we complement the prevailing theoretical framework of exit as a utility-maximizing problem among entrepreneurs with prospect theory and its recent applications in liquidation of investment decisions. We empirically test the model using two Swedish databases which follow 1,735 new ventures and their founders over eight years. We find that entrepreneurs exit from both firms in financial distress and firms performing well. In addition, commonly examined human capital factors (entrepreneurial experience, age, education) and failure-avoidance strategies (outside job, reinvestment) differ substantially across the four exit routes, explaining some of the discrepancies in earlier studies

Keywords: Entrepreneurial Exit; Prospect Theory; Human Capital

41 pages, February 10, 2009

Note: Forthcoming, Journal of Business Venturing

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