Time to exit: “revolving door effect” or “Schumpeterian gale of creative destruction”?

Abstract

Over the past decades, exit has been analyzed at the theoretical and empirical levels. From this rich series of contributions, two basic patterns of exit can be identified: the revolving door and the gale of creative destruction. In the first, the liability of newness plays a major role in the exit process, while in the second the displacement of non-innovators is the driver of exit. We have tested these two patterns of exit on the population of Dutch firms that exited in 2018. We find confirmation that the two patterns characterize different types of industries. In industries in which innovation does not play a major role, the revolving door effect is the typical pattern and exit is concentrated among the adolescent firms. These firms are also small in size. On the contrary, in industries in which innovation plays a role, exit takes place both among infant as well as mature firms. Exiters are not necessarily only the smaller firms. While a highly innovative and uncertain environment can threaten the survival of infant firms, the exit of mature firms is driven by the innovation of young firms, following the gale of creative destruction.

The dual pressures of youth and expansion: revisiting stage theories of growth in SMEs

“…All five cases explored in this study showed an appreciation of the value of motivated, skilled staff able to turn their hand to the fluctuating requirements of the fast-growing firm. More research is needed to explore the pivotal importance or otherwise of HR maturity as opposed to (for example) innovation (Cefis et al. , 2021) in determining long-time survival of a group of firms facing staff churn.…”

Firm growth and profitability: The role of age and size in shifts between growth–profitability configurations

“…Third, the focus here was on limited companies (due to potential issues in comparing financial information between legal forms; see Statistics Finland, 2019). Evidence from the firm exit context (Cefis et al, 2021) indicates, however, that firm performance patterns with age may differ between legal forms. Lastly, the start dates used in the firm age calculation link to firm identifier codes in the source data.…”

Founder's Human Capital and the Entrepreneurial Process Duration

“…Research focus has largely remained on an individual's decision to enter the venture creation process and not on how an individual's characteristics relate to entrepreneurial exit decisions (Kerr, Kerr and Xu, 2017), even when new venture initiatives are exposed to high risk of infant exit (Cefis et al, 2021); around half of the new ventures initiatives cease during the entrepreneurial process (Hammer, 2019;Cueto, Suárez and Mayor, 2020); and at least half of all nascent ventures never reach a stage where they can recoup their start-up costs (Parker and Belghitar, 2006). In other words, most nascent entrepreneurs do not succeed in launching their ventures and decisions to exit the entrepreneurial process are a frequent phenomenon (Lukeš and Zouhar, 2016).…”

“…although it has been analysed both from the theoretical and empirical perspective, these have mostly considered the firm-level perspective (Cefis et al, 2021;Cefis et al, 2020;Coad, Frankish and Storey, 2020;Coad et al, 2013), including time to firm's exit (Elfenbein and Knott, 2015). Moreover, the venture exit decision has been considered the flip side of venture persistence (Zhu et al, 2018) in presence of start-up challenges and other available alternatives (Holland and Shepherd, 2013).…”

“…Through the overall enquiry of this chapter, I would attempt to fill the gap in founder exit studies that have largely overlooked a founder's voluntary exit and/or projected an exit as a rather unwelcome outcome (Xi et al, 2020). The founder-level exit studies are also rare as mostly firm-level exit has largely been studied (Cefis et al, 2021;Cefis et al, 2020;Coad, Frankish and Storey, 2020;Coad et al, 2013). The firm-level focus has also undermined the importance of the founder's exit in the entrepreneurial process studies (Rouse, 2016) and has also lacked a time-based perspective (Guerrero, Liñán and Cáceres-Carrasco, 2020) to exit research that does not necessarily prelabel exit as a negative outcome.…”