Interpreting Performance in Research on Independent Entrepreneurship

The performance of the often young and independent businesses studies in entrepreneurship research is not only difficult to assess (Brush & Vanderwerf, 1992) and hard to predict (Cooper, 1995), but also a challenge to interpret. Is discontinuation a sign of failure, and always a worse outcome than continuation of the business? Is growth a sure sign of success and always a better outcome than stability? Based on empirical insights from several large research studies this paper will argue that greater care ought to be taken in the selection and interpretation of the dependent variable in entrepreneurship research. It will be argues that discontinuation of some incumbent firms is a necessary part of 'creative destruction' (Schumpeter, 1934) and that termination of a start-up effort may be the best outcome of an essentially sound experiment. If a venture idea is inherently non-viable it is better to learn that earlier rather than later and to minimize the losses rather than continuing dreaming perhaps because the founders shun any 'acid test' for as long as possible. As regards growth, empirical results demonstrate that many firm founders do embrace growth as a goal. Moreover, firms that embark on a growth trajectory starting from a situation of low profitability rarely became profitable as a result of their expansion. Instead they often become low performing firms in terms of growth and profits in subsequent periods. Implications for entrepreneurs, policy-makers and researchers are discussed.