- Elgar original reference
Edited by Kevin Hindle and Kim Klyver
12 The new venture mortality myth Jonathan Levie, Gavin Don and Benoît Leleux INTRODUCTION In this chapter, we demonstrate the following: in advanced economies of the world: a) new businesses do not suffer a high failure rate; b) most people overestimate the chances of new firm failure; and c) fear of failure reduces entrepreneurial entry. Taken together, they suggest that new venture creation rates are lower than they would be if the true rate of new venture failure was widely known. Official statistics tend to exaggerate enterprise churn, and it is common practice to assume that enterprise discontinuations are failures. A UK example of the weaknesses of sales tax registration, company incorporation data and business bank account data as measures of business failure is provided by the following case of a real business that trades as Young Company Finance. YCF was founded by Equitas, a partnership, in January 1998. At the outset it incorporated (measurable as a Companies House start-up), registered for value added tax (measurable as a VAT start-up) and opened two bank accounts (measurable as two parallel bank start-ups). In 1999 it opened a new bank account (a third bank start-up). In 2000 YCF Ltd sold its business and assets to Jonathan Harris, who incorporated a company to acquire them (a second Companies House start-up), opened a bank account (a fourth bank start-up) and registered for VAT (second VAT start-up). In due course, YCF Ltd, now a cash shell, closed its three bank accounts (three bank closures)...
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