Termination of nascent entrepreneurship: The central effects of action crisis in new venture creation

Abstract

Because current conceptualizations are insufficient with respect to explaining the termination subprocess of nascent entrepreneurship, little is known regarding the liminal space in which the decision between termination and persistence is made. To solve this problem, we apply the Theory of Action Phases, extend it using the notion of an action crisis, and propose that (i) the extent to which nascent entrepreneurs experience action crises informs the decision between persistence and termination and (ii) the odds of experiencing an action crisis and the temporal length of an action crisis phase depend largely on the goal-directed actions that have previously been taken. We test and find empirical support for our main hypotheses by reference to a harmonized dataset drawn from the Panel Study of Entrepreneurial Dynamics (PSED). These findings contribute to both theoretical and practical advancements in the field of nascent entrepreneurship and research on entrepreneurial action. With respect to research, the inclusion of the notion of action crisis allows us to conceptualize termination as a subprocess of nascent entrepreneurship and to explain decisions between termination and persistence in the context of new venture creation. By taking the time-saving and time-delaying effects of actions into consideration, our study also offers a more nuanced view of entrepreneurial action given that the length of an action crisis is informed by the actions of planning and implementation that have previously been taken. In practical terms, we address some lasting problems that arise in the context of entrepreneurship-focused public policies and provide practical advice for nascent entrepreneurs.