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Analysis of Young Small Firms That Have Closed: Delineating Successful from Unsuccessful Closures
Analysis of Young Small Firms That Have Closed: Delineating Successful from Unsuccessful Closures
Working Paper Number: CES-02-24
Abstract
This study of small businesses created between 1989 and 1992, and then closed down between 1993 and 1996, reveals that owners often described their firms as “successful” when the disclosure decision was made. . Theoretical explanations consistent with this pattern are explored in this study. One view describes successful closures as rational outcomes of learning processes undertaken by entrepreneurs opening firms amidst considerable uncertainty. Another approach sees the seeming paradox of successful closure in terms of alternative opportunities: if something better comes along, the entrepreneur may close down. Empirically, successful closure owners are found to be moving on to more attractive alternatives.
Page Last Revised - October 8, 2021
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