Predicting new venture survival and growth:   does the fog lift?

Alex Coad; Julian S. Frankish; Richard Roberts; David Storey

doi:10.1007/s11187-016-9713-1

Predicting new venture survival and growth: does the fog lift?

Alex Coad
, Julian S. Frankish
, Richard Roberts
, David Storey

University of Sussex
Max Planck Institute of Economics
University of Warwick

Research output: Contribution to journal › Article › peer-review

65 Citations (SciVal)

68 Downloads (Pure)

Abstract

This paper investigates whether new venture performance becomes easier to predict as the venture ages: does the fog lift? To address this question we primarily draw upon a theoretical framework, initially formulated in a managerial context by Levinthal (Adm Sci Q 36(3):397–420, 1991) that sees new venture sales as a random walk but survival being determined by the stock of available resources (proxied by size). We derive theoretical predictions that are tested with a 10-year cohort of 6579 UK new ventures in the UK. We observe that our ability to predict firm growth deteriorates in the years after entry—in terms of the selection environment, the ‘fog’ seems to thicken. However, our survival predictions improve with time—implying that the ‘fog’ does lift.

Original language	English
Pages (from-to)	217-241
Journal	Small Business Economics
Volume	47
Issue number	1
Early online date	17 Mar 2016
DOIs	https://doi.org/10.1007/s11187-016-9713-1
Publication status	Published - Jun 2016

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© The Author(s) 2016. This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.

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Predicting new venture survival and growth: Does the fog lift?
© The Author(s) 2016. This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.
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Cite this

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title = "Predicting new venture survival and growth: does the fog lift? ",

abstract = "This paper investigates whether new venture performance becomes easier to predict as the venture ages: does the fog lift? To address this question we primarily draw upon a theoretical framework, initially formulated in a managerial context by Levinthal (Adm Sci Q 36(3):397–420, 1991) that sees new venture sales as a random walk but survival being determined by the stock of available resources (proxied by size). We derive theoretical predictions that are tested with a 10-year cohort of 6579 UK new ventures in the UK. We observe that our ability to predict firm growth deteriorates in the years after entry—in terms of the selection environment, the {\textquoteleft}fog{\textquoteright} seems to thicken. However, our survival predictions improve with time—implying that the {\textquoteleft}fog{\textquoteright} does lift.",

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AB - This paper investigates whether new venture performance becomes easier to predict as the venture ages: does the fog lift? To address this question we primarily draw upon a theoretical framework, initially formulated in a managerial context by Levinthal (Adm Sci Q 36(3):397–420, 1991) that sees new venture sales as a random walk but survival being determined by the stock of available resources (proxied by size). We derive theoretical predictions that are tested with a 10-year cohort of 6579 UK new ventures in the UK. We observe that our ability to predict firm growth deteriorates in the years after entry—in terms of the selection environment, the ‘fog’ seems to thicken. However, our survival predictions improve with time—implying that the ‘fog’ does lift.

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Predicting new venture survival and growth: does the fog lift?

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