Entrepreneurs need to balance risk of persisting with payoff of succeeding

May 20, 2013

In a new business, sometimes the better part of wisdom is knowing when to quit, a new study concludes.

Even though is a key to success, entrepreneurs might be more successful if they not only knew when to start a business and take risks, but also knew when to abandon it and find something that provides a greater opportunity, researchers said.

It may be to want to make an idea work, but it can also be a poor business decision to stay wedded to an idea if the evidence suggests it's not working as well as another potential opportunity.

"Entrepreneurs need to balance that desire to persist, which is in fact what often makes someone a successful entrepreneur, with the ability to sense when it is time to walk away," said Bobby Garrett Jr., an assistant professor of entrepreneurship at Oregon State University and co-author of the study.

The results are published online in the International Small Business Journal. Garrett and lead author Daniel Holland of Utah State University analyzed the decision-making process of 135 entrepreneurs in high-tech industries. They found that even when confronted with another business opportunity that could yield successful results, many entrepreneurs resisted quitting their current venture.

"It's escalation of commitment," Garrett said. "When an entrepreneur has invested resources into a new business, they have difficulty letting go even when things go south or another opportunity arises."

Garrett likens this psychology to a casino .

"Someone who has spent one hour at the roulette table may think, 'If I just stick with it, I can win,'" he said. "An entrepreneur's thought process is not dissimilar to this."

However, that same doggedness is also what makes entrepreneurs successful. In the field of entrepreneurship, Garrett said this is called "entrepreneurial ."

"Everyone knows that often fail," he said. "That same persistence, and ability to keep trying against the odds, is also an admirable trait, especially when that persistence pays off."

In their study, the researchers recommend that any potential entrepreneur keep the risk versus reward of any venture in mind, and evaluate the chances that their start-up may succeed.

Explore further: Fear of losing money, not spending habits, affects investor risk tolerance, study finds

add to favorites email to friend print save as pdf

Related Stories

No holes in Swiss online networking theory

May 09, 2013

Often, it's not what you know, but who you know when it comes to business and research success and that still applies even in the age of online social networking, according to results to be published in the International Jo ...

US pushes to keep entrepreneur jobs in the country

Nov 28, 2012

(AP)—The Obama administration's top immigration official says his agency is working to attract and keep more foreign-born high-tech entrepreneurs who are seeking to start a company in the U.S.

Unlocking the entrepreneurial spirit

Jan 15, 2013

Being your own boss is an aspiration for many Europeans - almost 4 out of 10 people in fact. The prospect of a potentially better income, independence and the freedom to work wherever and whenever is a highly ...

How successful Chinese entrepreneurs really think

Jan 16, 2012

(PhysOrg.com) -- Can you really learn to be an entrepreneur? A new in-depth study offers fresh insights into how successful business players teach themselves to become better and better at making money.

Recommended for you

Narcissistic CEOs and financial performance

Jul 24, 2014

Narcissism, considered by some as the "dark side of the executive personality," may actually be a good thing when it comes to certain financial measures, with companies led by narcissistic CEOs outperforming those helmed ...

Drugmaker GSK slashes annual profits forecast

Jul 23, 2014

British drugmaker GlaxoSmithKline on Wednesday slashed its 2014 profits forecast as second-quarter earnings sank on the back of weak US trade, adverse currency moves and a Chinese bribery probe.

User comments : 0