Personality and various motives of entrepreneurial exit in highly innovative industries

Entrepreneurial exit is widely understudied (DeTienne and Cardon 2010), especially in highly innovative environments. Particularly, research on entrepreneurial exit mainly recognizes economic factors that determine exit decisions (see Wennberg et al. 2010). However, as Gimeno et al. (1997) claim that entrepreneurs at least rely in part on their psychological income when it comes to exit decisions, even non economic forces may lead to exit. These non economic factors, like relationships and emotional health, are though supposed to be useful to investigate (Cardon et al. 2005, DeTienne and Cardon 2010), because entrepreneurial exit has a strong impact on the entrepreneur, the firm, industry dynamics and the whole economy through the reallocation of resources (DeTienne 2010). On the other hand, entrepreneurs with certain qualities design their firms and their firm environments (Sarasvathy 2004), which may have an impact on their propensity to exit. But what are these factors? One very promising approach to explain entrepreneurial exit are the Big Five personality traits, consisting of conscientiousness, extraversion, agreeableness, openness and neuroticism (Digman 1990). So far, no study links the Big Five personality measure to various exit motives, which are in part based on non-economic factors. Therefore in this paper I pose the question: 'Are the Big Five personality traits differently related to various entrepreneurial exit motives in highly innovative industries? ' In order to answer my research question, I use data from the Thuringian Founder Survey consisting of 423 entrepreneurs from the German federal state of Thuringia. This survey is an interdisciplinary project on the success and failure of teamor solo-entrepreneurs in the East German state of Thuringia. The entrepreneurs that are investigated in this study operate in innovative industries according to Centre for European Research (ZEW) classification 'advanced technology' and 'technology-oriented services' (Grupp and Legler 2000). 98 of the 423 (co-) founders ceased their entrepreneurial activity. From these 98 discontinuances, I could also identify four specific reasons for discontinuance. Multivariate Cox-regressions (Wei, Lin and Weissfeld 1989) are employed to trace the possible link between the entrepreneur's Big Five personality traits and the three above introduced reasons to exit, namely (1) overinvestment of personal resources, (2) low job satisfaction, and (3) problems with other team members, given a founder team exists, and (4) other reasons with the help of a competing risks framework. My results indicate that from the Big Five only neuroticism has a (negative) effect on exit due to overinvestment. Moreover, exit because of problems with other founder team members negatively relates to agreeableness. Finally, I find that exit due to job dissatisfaction positively relates to extraversion and neuroticism, while it negatively relates to agreeableness. The above results imply that entrepreneurial exit is not only affected by economic considerations, but by other motives, like well being, relationships and risk taking preferences, too. Viewing strategic exit decisions only from the point of economic firm performance hence may fall short of tackling the issue of entrepreneurial exit. This finding suggests that psychological income may play an important role in entrepreneurial exit decisions, as it is proposed by Gimeno et al. (1997). As a consequence, individual differences in explaining entrepreneurial exit decisions are not only related to human capital, opportunities or demographic factors (see Wennberg et al. 2010), but also the personality of entrepreneurs. In conclusion, investigating factors that affect various exit motives might be a more fruitful approach to understand exit decisions than only consider exit as a one dimensional phenomenon.