Unveiling failure patterns of start-ups in the life sciences industry

Abstract

This research reveals failure patterns of firms within the life sciences industry, by utilizing a cluster analysis approach. We uncover hidden patterns in ceased firms and identify four distinct patterns: false start, false promise, realistic management, and walking dead. Each pattern represents a unique combination of firm characteristics that led to their downfall. The study sample consists of 230 ceased firms in the life sciences industry that are registered in the Israel Venture Capital database. By examining the similarities and dissimilarities between the patterns, the study aims to build a taxonomy of failures in the life sciences industry. The findings reveal that non-founder CEOs are more likely to halt their firm's operations during the R&D stage, despite having the highest performance compared to other patterns. This study contributes to a deeper understanding of entrepreneurship by focusing on failed endeavors. The results shed light on the leadership dynamics within these specialized and uncertain domains, providing valuable insights for decision-makers. Overall, this research enhances our knowledge of the factors contributing to failure and offers practical implications.