Cash-out or flame-out! opportunity cost and entrepreneurial strategy
Subtitle: theory, and evidence from the information security industry
By: Ashish Arora, Anand Nandkumar.
Contributors: Nandkumar, Anand.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper  1532; Working paper series (National Bureau of Economic Research : Online) -- working paper no.  15532.
Publisher: National Bureau of Economic Research
Published: 2009
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "We analyze how entrepreneurial opportunity cost conditions performance.  We depart from the literature on entrepreneurship which identifies survival with performance.  Instead, many entrepreneurs aim for a cash-out (IPO or acquisition), especially in innovation based industries.  Striving for a cash-out makes mistakes more likely and increases the probability of failure.  High opportunity cost entrepreneurs will attempt to cash-out (IPO or friendly acquisition) quickly, even if it implies a higher risk of failure.  Entrepreneurs with fewer outside alternatives may tend to linger on longer.  We formalize this intuition with a simple model.  Using a novel dataset of information security startups we find that entrepreneurs with high opportunity costs are not only more likely to cash-out but they are also more likely to fail.  As well, our results confirm the predicted role of venture quality in conditioning the relationship between entrepreneurial opportunity cost and entrepreneurial performance"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 12/1/2009.

Includes bibliographical references.

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Mode of access: World Wide Web.