Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 272: Variable Risk Preferences in New Firm Growth and Survival

Karl Wennberg (), Frédéric Delmar () and Alexander McKelvie ()
Additional contact information
Karl Wennberg: The Ratio Institute, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
Frédéric Delmar: Lund University, Postal: Sten K. Johnson Centre for Entrepreneurship, School of Economics and Management, Lund University, P.O. Box 7080, S-220 07 Lund, Sweden
Alexander McKelvie: Syracuse university, Postal: Department of Entrepreneurship & Emerging Enterprises, Whitman School of Management, Syracuse University, 721 University Ave., Syracuse, NY 13244 , USA

Abstract: We outline and test a decision-making theory of new venture growth and survival. Building upon research in entrepreneurship and decision making under risk, we hypothesize that entrepreneurs’ attention to survival and aspiration reference points changes based on venture age (¬experience-based learning), size (differences in decision complexity¬), and performance decision domain. Examining a panel of 14,760 new ventures in the professional services sector, our findings show how risk preferences change as a venture ages and increases in size. This approach offers a more nuanced view of decision making under risk and provides a theoretical explanation for the common patterns of new ventures’ probability of exit and growth diminishing with age and size.

Keywords: Growth; Survival; Aspiration levels; Focus of attention; New ventures; Risk preferences

JEL-codes: L26; M13

50 pages, May 12, 2016

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