Explanations for business closure Flashcards
Name the five approaches to explaining business closure
Gamblers ruin, Population ecology, RBV, Utility, Entrepreneurial learning
When would a business close according to gamblers ruin?
When the owner runs out of chips (resources)
When would a business close according to population ecology?
When resources become more scarce, competition within that market increases, (natural selection chooses adaptable businesses)
When would a business close according to RBV?
When a business lacks adequate resources (financial, managerial, organisational or competitive advantages)
When would a business close according to utility?
When the owner believes employment is better than self-employment
When would a business close according to entrepreneurial learning?
When the entrepreneurs begins to learn that their skills and current performances are not competent enough to stay in business
What did Metzger (2007) find?
More tickets you buy = more chance of winning, price of set up determines how many businesses you can own and thus your chances of winning
According to all 5 approaches, who/ what is more likely to close?
Smaller and younger businesses
Which 3 explanations have little empirical evidence to back it up?
RBV, utility, entrepreneurial learning
What disadvantage does gambler’s ruin and population ecology have in common?
Leave little room for the entrepreneur (overplays role of chance and environment respectively)
Which approach is an ‘organic’ approach to understanding business closure?
Population ecology (suggests natural selection of the unadaptable businesses occurs)
Which three approaches focus on the entrepreneur in some capacity? How do they focus on them?
RBV (how the entrepreneur utilise its resources), Utility (the entrepreneur’s decision making process), Entrepreneurial learning (the entrepreneur’s passive learning)
