Can Entrepreneurs Who Experienced Business Closure Bring Their New Start-Up to a Successful M&A?

Shai Harel, Eliran Solodoha*, Stav Rosenzweig

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

Numerous technology start-ups end up shutting down their operations. The present study aims to answer the following research questions: can entrepreneurs who closed their previous ventures bring their new venture to a successful exit through M&A and to what extent does this positive outcome correspond to whether investors funded their start-up? We examine 9723 technology start-ups established by 19,458 entrepreneurs. About half of the start-ups were funded, and 3463 of them had entrepreneurs with closure or with M&A experience. We find that entrepreneurs with closure experience are negatively associated with the probability of M&A as a main effect, in line with the theory that indicates imprinting. Nevertheless, entrepreneurs with closure experience are positively associated with the probability of M&A when their co-founders have M&A experience. We suggest that entrepreneurs with closure experience can compensate for their lack of M&A experience by learning from their peers who possess this experience. We discuss implications for theory, investors, and entrepreneurs.

Original languageEnglish
Article number386
JournalJournal of Risk and Financial Management
Volume15
Issue number9
DOIs
StatePublished - Sep 2022

Keywords

  • M&A
  • closure experience
  • entrepreneurs
  • funding

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