Holding on for too long? An experimental study on inertia in entrepreneurs' and non-entrepreneurs' disinvestment choices

Serena Sandri, Christian Schade (), Oliver Musshoff and Martin Odening
Additional contact information
Serena Sandri: Institute for Entrepreneurial Studies and Innovation Management - Institute for Entrepreneurial Studies and Innovation Management
Christian Schade: Institute for Entrepreneurial Studies and Innovation Management - Institute for Entrepreneurial Studies and Innovation Management

Post-Print from HAL

Abstract: Disinvestment, in the sense of project termination and liquidation of assets including the cession of a venture, is an important realm of entrepreneurial decision-making. This study presents the results of an experimental investigation modeling the choice to disinvest as a dynamic problem of optimal stopping in which the patterns of decisions are analyzed with entrepreneurs and non-entrepreneurs. Our experimental results reject the standard net present value approach as an account of observed behavior. Instead, most individuals seem to understand the value of waiting. Their choices are weakly related to the disinvestment triggers derived from a formal optimal stopping benchmark consistent with real options reasoning. We also observe a pronounced 'psychological inertia', i.e., most individuals hold on to a losing project for even longer than real options reasoning would predict. The study provides evidence for entrepreneurs and non-entrepreneurs being quite similar in their behavior.

Keywords: jhsdbv (search for similar items in EconPapers)
Date: 2010-09-02
Note: View the original document on HAL open archive server: https://hal.science/hal-00856602v1
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Published in Journal of Economic Behavior and Organization, 2010, 76 (1), pp.30. ⟨10.1016/j.jebo.2010.02.011⟩

Downloads: (external link)
https://hal.science/hal-00856602v1/document (application/pdf)

Related works:
Journal Article: Holding on for too long? An experimental study on inertia in entrepreneurs' and non-entrepreneurs' disinvestment choices (2010)
Working Paper: Holding on for too long? An experimental study on inertia in entrepreneurs’ and non-entrepreneurs’ disinvestment choices (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00856602

DOI: 10.1016/j.jebo.2010.02.011

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().