TY - JOUR
T1 - The Liability of Volatility and How it Changes Over Time Among New Ventures
AU - Lundmark, Erik
AU - Coad, Alex
AU - Frankish, Julian S.
AU - Storey, David J.
N1 - Funding Information:
The authors wish to thank the editor, Alexander McKelvie, and three anonymous reviewers for insightful feedback. We are also grateful to Richard Roberts and the seminar participants at ISBE 2014 (Manchester, UK) and ACERE 2019 (Sydney, Australia). An earlier version of this paper won the “Best Paper Award in Entrepreneurial Performance” at ACERE 2019. The usual caveat applies. The author(s) received no financial support for the research, authorship, and/or publication of this article.
Publisher Copyright:
© The Author(s) 2019.
PY - 2020/9/1
Y1 - 2020/9/1
N2 - This article theorizes how short-term revenue volatility affects new venture viability and how such volatility develops over time. Tracking the bank accounts of 6,578 new ventures over a 10-year period, we find that, even after controlling for a range of other factors, short-term revenue volatility is a strong predictor of venture exit. Although short-term revenue volatility is associated with the depletion of buffer resources and financial default, surviving ventures do not, on average, decrease their short-term revenue volatility over time. However, short-term revenue volatility decreases at the cohort level due to higher exit rates of volatile ventures.
AB - This article theorizes how short-term revenue volatility affects new venture viability and how such volatility develops over time. Tracking the bank accounts of 6,578 new ventures over a 10-year period, we find that, even after controlling for a range of other factors, short-term revenue volatility is a strong predictor of venture exit. Although short-term revenue volatility is associated with the depletion of buffer resources and financial default, surviving ventures do not, on average, decrease their short-term revenue volatility over time. However, short-term revenue volatility decreases at the cohort level due to higher exit rates of volatile ventures.
KW - adaptation
KW - evolutionary theory
KW - liability of newness
KW - liability of smallness
KW - selection
UR - http://www.scopus.com/inward/record.url?scp=85088594906&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85088594906&partnerID=8YFLogxK
U2 - 10.1177/1042258719867564
DO - 10.1177/1042258719867564
M3 - Article
AN - SCOPUS:85088594906
SN - 1042-2587
VL - 44
SP - 933
EP - 963
JO - Entrepreneurship: Theory and Practice
JF - Entrepreneurship: Theory and Practice
IS - 5
ER -