The Liability of Volatility and How it Changes Over Time Among New Ventures

Erik Lundmark, Alex Coad (), Julian S. Frankish and David J. Storey

Entrepreneurship Theory and Practice, 2020, vol. 44, issue 5, 933-963

Abstract: 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.

Keywords: liability of newness; adaptation; selection; evolutionary theory; liability of smallness (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:entthe:v:44:y:2020:i:5:p:933-963

DOI: 10.1177/1042258719867564

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