The Birth, Growth and Demise of Entrepreneurial Firms
It is time to conclude and sum up the work presented in this book. We will here address the implications of our framework and of our major results on theory and method development, including for management and policy making. THEORETICAL IMPLICATIONS A good theory needs to be simple, parsimonious, and realistic. A reason to prefer simpler, more parsimonious theories is that such theories are more constraining and thus more falsifiable. A model that is not over-fitted to the data increases its credibility (Popper, 1959; Pearl, 2000). Moreover, it is easier to understand and apply. A theory also needs to be realistic in order for us to apply it in practice. This becomes even more evident for theoretical models based on observational data, as is the case in this book as in the majority of entrepreneurship studies. Theory is important for the following three reasons. First, the formal establishment of causality is a property of a theoretical model, not merely of data or statistical analyses. Hence we cannot understand and explain our data and analyses without theory. Second, many different theoretical models can explain the same data. We therefore need to choose a clear perspective and follow it through so as to be able to exclude alternative explanations to the greatest extent possible. Third, assumptions must be made in any model of a causal-deductive type. Therefore a good theory should allow us to derive a model which represents a logically consistent system within which hypothetical “thoughts experiments can be conducted to...
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