Journal
SMALL BUSINESS ECONOMICS
Volume 47, Issue 1, Pages 217-241Publisher
SPRINGER
DOI: 10.1007/s11187-016-9713-1
Keywords
Entrepreneurship; Firm growth; Survival analysis; Coefficient of determination; Selection environment; Gambler's Ruin theory
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Funding
- ESRC
- TSB
- BIS
- NESTA as part of the IRC [ES/H008705/1, ES/J008427/1]
- AHRC as part of the FUSE project
- ESRC [ES/J008427/1, ES/H008705/1] Funding Source: UKRI
- Economic and Social Research Council [ES/J008427/1, ES/H008705/1] Funding Source: researchfish
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This paper investigates whether new venture performance becomes easier to predict as the venture ages: does the fog lift? To address this question we primarily draw upon a theoretical framework, initially formulated in a managerial context by Levinthal (Adm Sci Q 36(3):397-420, 1991) that sees new venture sales as a random walk but survival being determined by the stock of available resources (proxied by size). We derive theoretical predictions that are tested with a 10-year cohort of 6579 UK new ventures in the UK. We observe that our ability to predict firm growth deteriorates in the years after entry-in terms of the selection environment, the 'fog' seems to thicken. However, our survival predictions improve with time-implying that the 'fog' does lift.
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