Introduction
Entrepreneurs who have abandoned a business must weigh a number of personal, social
and economic factors when deciding to start a new business (Dyer, 1994). Yet the act of
restarting presupposes both willingness on the part of the entrepreneur and its objective
feasibility. Rational entrepreneurs’ willingness to restart is primarily influenced by the
expectancy of future self-employment profits compared to other income alternatives.
While the former lies within the purview of the entrepreneur, the latter may be deter-
mined to large extent by external individuals and institutions - particularly in the case of
a previous business failure and/or financial losses. This is also recognized by Stam et al.
(2006) who note: "[...] how the prior business of the ex-entrepreneur was terminated [...]
impact not just the post-entrepreneurial career in general, but also renascent entrepre-
neurship in particular” (Stam et al., 2006, p. 8).
To date no study analyzing the effects of different types of abandoning a business on the
restart likelihood (e.g. Metzger, 2008 or Stam et al., 2006) has attempted to differ be-
tween the willingness of entrepreneurs to restart and its objective feasibility. This article
aims to address this gap in scholarship. By including measures that account for stake-
holder groups who bear financial losses arising from business closure, feasibility can be
approximated and its effects on the likelihood of an entrepreneurial restart can be ana-
lyzed. To do so, unique data of foundations in Germany is used containing information
about financial losses due to business closures.
Entrepreneurial restarts
Many entrepreneurs who close a business are discouraged and choose the exit option,
i.e. turn their backs on entrepreneurship (Ronstadt, 1986). Others are unflagging. They
engage in several firms swallowing also business failures before they find "their” business
(Ronstadt, 1982). Renascent entrepreneurs i.e. entrepreneurs who closed a business and
prepare their restart can be characterized by several factors. One of the first analyses
which considered such latent restarters is that of Wagner (2003). He investigated in
which respects entrepreneurs who had ‘closed or given up’ a firm in the past and who
toying with the idea to venture anew differ from those who leave the entrepreneurial ca-
reer path. Relying on survey data he found that especially entrepreneurs who are young-
ish and higher educated aspire to take the second chance. The latent restarters are, in
addition, comparatively less risk averse and have rather more contact with other start-up
entrepreneurs. Stam et al. (2006) also used survey data to characterize renascent entre-
preneurs and came to the conclusion that the human capital of the ex-entrepreneurs is
indeed very relevant. Highly educated entrepreneurs and those with multiple-
entrepreneurial experiences are more prone to restart than others, as are entrepreneurs
who abandon a business by the way of selling it. The human capital effect is confirmed
by Schutjens and Stam (2006). Based on a small sample analysis, they show that ex-
perience is crucial and positively affects restart probability.