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How an Economic Recession Affects Qualitative Entrepreneurship: Focusing on the Entrepreneur's Exit Decision

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  • Gihyun Kwak
  • Jeong‐Dong Lee

Abstract

This study analyzes how an economic recession affects entrepreneurship from a qualitative perspective. We define entrepreneur as a person who takes risks under uncertainty. Based on this definition, an entrepreneur's exit decision is modeled using real options theory to measure entrepreneur's willingness to accept uncertainty. We find that entrepreneurs who entered before a recession exit when their critical revenue stream reaches 0.16 times the average revenue stream value. The equivalent value for entrepreneurs who enter during an economic recession is 0.33 times the average revenue stream. Furthermore, when uncertainty doubles, the exit probability of entrepreneurs who enter during an economic recession is approximately 2.75 times higher than that of entrepreneurs who enter before recession. We conclude that the majority of entrepreneurs who enter during an economic recession are qualitatively disadvantaged, which leads to the overall decrease in qualitative entrepreneurship. Copyright © 2016 John Wiley & Sons, Ltd.

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  • Gihyun Kwak & Jeong‐Dong Lee, 2017. "How an Economic Recession Affects Qualitative Entrepreneurship: Focusing on the Entrepreneur's Exit Decision," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 38(7), pages 909-922, October.
    • Handle: RePEc:wly:mgtdec:v:38:y:2017:i:7:p:909-922
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    Cited by:

    1. Malin Arve & Claudine Desrieux & Romain Espinosa, 2023. "Entrepreneurial intention and resilience: An experiment during the Covid‐19 lockdown," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(2), pages 698-715, March.
    2. Rajeev K. Goel & James W. Saunoris, 2022. "Push from the shadows: Does the shadow economy facilitate market exit of firms?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 2955-2966, October.

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