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How do you decide if the time is right to end a startup?
Featuring: Daniel W. Elfenbein, PhD and Anne Marie Knott, PhD
About the research:
Research by Olin’s Daniel Elfenbein and Anne Marie Knott examines why entrepreneurs are slow to exit from bad businesses. They found that the financial incentives that drove an entrepreneur to start a business—cash from the company, stock, options—may blind them to the reality of the firm’s future. These incentives actually shape the entrepreneur’s belief in the company’s prospects, while advisers with no financial interests in a company make better decisions about when to pull the plug on a floundering business.
Publication: “Equity Stakes and Exit: An Experimental Approach to Decomposing Exit Delay,”Strategic Management Journal, Volume 38, Issue 2, February 2017, pp. 278-299.
Professor Elfenbein’s research focuses on how firms and employees create and capture value through reputations, relationships, and other signals of quality; on entrepreneurial entry and exit; and on ways that firms benefit from philanthropy and the creation of public goods. He is the Academic Director of the MBA Consulting Platform at Olin Business School.
Professor Knott’s research interest is innovation—the conditions under which firms acting in their own self-interest generate economic growth. The work takes two forms: large scale R&D and entrepreneurship. She is the author of How Innovation Really Works: Using the Trillion-Dollar R&D Fix to Drive Growth.
Washington University in St. Louis Olin Business School Office of Corporate Relations Campus Box 1156 One Brookings Drive, St. Louis, MO 63130-4899, United States
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