Table of Contents

Entrepreneurship and Growth in Local, Regional and National Economies

Entrepreneurship and Growth in Local, Regional and National Economies

Frontiers in European Entrepreneurship Research

Edited by David Smallbone, Hans Landström and Dylan Jones-Evans

This state-of-the-art book provides a window on contemporary European entrepreneurship and small business research. The papers selected demonstrate the applied nature of entrepreneurship research as well as the various contributions that entrepreneurship can make to local, regional and national development.

Chapter 8: Becoming an Ex-entrepreneur: Firm Performance and the Sell-out or Dissolution Decision

A. Miguel Amaral, Rui Baptista and Francisco Lima

Subjects: business and management, entrepreneurship


A. Miguel Amaral, Rui Baptista and Francisco Lima INTRODUCTION A significant amount of research in entrepreneurship and market dynamics focuses on the determinants of firm entry and survival as a way of understanding business performance (Santarelli and Vivarelli, 2006). The most common views underlying this research suggest that firm dissolution relates mostly with failure (Caves, 1998), thus supporting the argument that firm survival is an adequate indicator for measuring entrepreneurial success. However, there are obvious inconsistencies between this view and reality. For instance, an individual may cease to be an entrepreneur by giving up ownership of his/her firm, meaning that there can be entrepreneurial exit without firm exit or dissolution. It may also happen that exiting firms were performing better before closing than surviving firms. Such discrepancies have led to the recognition of ‘entrepreneurial exit’ as a heterogeneous phenomenon that is distinct from, but related to, firm exit. By looking solely at the life duration of a firm one cannot completely capture its performance, since not all firms are compulsorily liquidated and not all entrepreneurs’ decisions to exit are involuntary. Taylor (1999) investigated the duration of self-employment spells, differentiating between involuntary and voluntary terminations. The author found that while a relatively small percentage of self-employment terminations were a result of bankruptcy, leading to individuals’ unemployment, the highest percentage of businesses terminated with a move of the entrepreneur to a better or different alternative activity. Chrisman and McMullan (2000) have also detected that dissolution through bankruptcy is a relatively rare event....

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