Selected Essays of Dean A. Shepherd
Chapter 22: The fallacy of “only the strong survive”: The effects of extrinsic motivation on the persistence decisions for under-performing firms
Although well-established theoretical perspectives (e.g. economic, population ecology) propose under-performing firms will be selected out of the environment, other research suggests that performance alone does not fully explain the persistence of under-performing firms. Why would one entrepreneur make a decision to persist with an under-performing firm while another would choose to discontinue operations? Gimenoetal.(1997) propose that heterogeneity among entrepreneurs may lead to different thresholds of performance. Other research into reference points and entrepreneurial aspirations (e.g. Kahnemanand Tversky, 1979; Stewart et al., 1999) seems to support this perspective.
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