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Once bitten, twice shy? The performance of entrepreneurial restarts

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  • Metzger, Georg

Abstract

The aim of this paper is to analyze the effect of entrepreneurial experience on firm growth. According to the human capital theory, individuals who have higher ?human capital? are more successful than others. Entrepreneurial experience is a kind of human capital and, therefore, should affect firm performance positively. In reality, however, not all types of experience indicate enhanced knowledge alone. Bad experience, here the experience of failure, might equally be a signal for entrepreneurial weakness and, thus, an argument for exercising restraint in possible further business ventures. The ambiguous effects of this failure experience on firm success necessitate an in-depth analysis of the issue. Therefore, this paper contains an empirical comparison of firms involving experienced entrepreneurs and novice firms. The analysis shows that entrepreneurial experience affects firm growth positively. Accounting for failure experience separately reveals a negative effect. Interpreting this finding in combination with other control measures indicates that failed entrepreneurs indeed behave more cautiously regarding firm growth.

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  • Metzger, Georg, 2006. "Once bitten, twice shy? The performance of entrepreneurial restarts," ZEW Discussion Papers 06-083, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:5476
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    Cited by:

    1. Alex Coad & Julian Frankish & Paul Nightingale & Richard Roberts, 2014. "Business experience and start-up size: Buying more lottery tickets next time around?," Small Business Economics, Springer, vol. 43(3), pages 529-547, October.
    2. Coad, Alex & Frankish, Julian & Roberts, Richard G. & Storey, David J., 2013. "Growth paths and survival chances: An application of Gambler's Ruin theory," Journal of Business Venturing, Elsevier, vol. 28(5), pages 615-632.
    3. Metzger, Georg, 2007. "Personal experience: a most vicious and limited circle!? On the role of entrepreneurial experience for firm survival," ZEW Discussion Papers 07-046, ZEW - Leibniz Centre for European Economic Research.
    4. Füner, Lena & Berger, Marius & Bersch, Johannes & Hottenrott, Hanna, 2023. "Local networks and new business formation," ZEW Discussion Papers 23-067, ZEW - Leibniz Centre for European Economic Research.
    5. Simon C. Parker & Thomas Åstebro & David B Audretsch & Robert Blackburn & Andrew Burke & Alex Coad & Marc Cowling & Per Davidsson & Michael Fritsch & Francis Greene & Paul D. Reynolds & Roy Thurik, 2024. "“Remembering David J Storey, a pioneer of the entrepreneurship field”," Small Business Economics, Springer, vol. 62(1), pages 1-21, January.
    6. Metzger, Georg, 2008. "Firm Closure, Financial Losses and the Consequences for an Entrepreneurial Restart," ZEW Discussion Papers 08-094, ZEW - Leibniz Centre for European Economic Research.
    7. Block, Jörn & Brockmann, Heiner & Klandt, Heinz & Kohn, Karsten, 2008. "Gründungshemmnisse in Marktmechanismen und Marktumfeld: Facetten empirischer Evidenz [Start-up Barriers in Germany: A Review of the Empirical Literature]," MPRA Paper 9358, University Library of Munich, Germany.
    8. Julian S. Frankish & Richard G. Roberts & Alex Coad & Taylor C. Spears & David J. Storey, 2013. "Do entrepreneurs really learn? Or do they just tell us that they do?," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(1), pages 73-106, February.

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    More about this item

    Keywords

    Business Failure; Firm Growth; Entrepreneurial experience;
    All these keywords.

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups

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