Personal Experience: A Most Vicious and Limited Circle!? On the Role of Entrepreneurial Experience for Firm Survival

Personal Experience: A Most Vicious and Limited Circle!?

normally be used by sellers to identify financially strong firms, and that “the
screening process is effective in sorting if it is sufficiently more costly for high
default-risk buyers to signal financial health than low default-risk buyers” (Smith
1987, p. 868). Therefore, information about the firms’ payment behavior is
brought into the analysis. This can be used to distinguish between firms which
keep to the payment terms or exceed them only occasionally, and other firms.
This approach allows the detection of latent failures among the voluntary clo-
sures by looking for deteriorated payment behavior, which firms are likely to
exhibit before closures that are officially voluntarily but actually economically
forced, for example to avoid bankruptcy. Due to the lack of additional data,
bankruptcy and the voluntary closure of a distressed firm are the only definitions
of failure which can be considered. Of course, other Entrepreneurs, for example
those who close a firm because they don’t achieve their targets, might also be
considered as having failed.

As summarized in Table 1, there are four experience indicators introduced in
the survival analysis, which classify the entrepreneurs by their most recent pre-
vious venture: (1) restarters who left a firm by the way of sale of shareholdings,
(2) restarters who voluntarily closed a financially sound firm, (3) those who vol-
untarily closed a financially distressed firm and (4) restarters who went bankrupt.
The first two restart types can be considered as having something like entrepre-
neurial success experience, while the latter two restart types indicate failure ex-
perience.

Previously failed restarters can be denoted as ‘determined entrepreneurs’ be-
cause they closed their firms for financial reasons but are not discouraged by this
experience (Stokes and Blackburn 2001). There is another type of experienced
entrepreneurs: so called portfolio entrepreneurs. They found or participate in a
new business while they are still involved in an existing firm. Hence, portfolio
entrepreneurs do not fit the definition of restarters because they lack the funda-
mental requirement of closure. They are therefore not taken into consideration.
Additionally, they are different from restarters or serial entrepreneurs in many
ways. They differ in their whole attitude to entrepreneurship, i.e. the reasons

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