Entrepreneurial entropy: a resource exhaustion theory of firm failure from entrepreneurial orientation

Gali, Nazha, Hughes, Mathew (Mat), Morgan, Robert E. ORCID: https://orcid.org/0000-0001-8981-3144 and Wang, Catherine L. 2024. Entrepreneurial entropy: a resource exhaustion theory of firm failure from entrepreneurial orientation. Entrepreneurship Theory and Practice 48 (1) , pp. 141-170. 10.1177/10422587231151957

PDF - Accepted Post-Print Version Download (468kB)

Abstract

Entrepreneurial orientation (EO) can generate substantial gains and losses, exhausting firm resources and straining a firm’s ability to sustain its activities. We develop and test a resource exhaustion theory of firm failure, conceptualizing conditions under which EO increases the risk of firm failure by generating unsustainable amounts of entrepreneurial entropy. Using panel data on 804 large U.S. high-technology firms over 18 years, we find that EO increases the risk of firm failure, which is mediated by the lack of organizational resource slack. An abrupt change in EO increases the risk of firm failure, especially among underperforming firms.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management H Social Sciences > HF Commerce
Uncontrolled Keywords:	Resource exhaustion theory, entrepreneurial orientation, firm failure, entropy, change in EO, organizational resource slack, liquidity, underperformance, survival bias, asset specificity, pacing.
Publisher:	SAGE Publications
ISSN:	1042-2587
Date of First Compliant Deposit:	30 January 2023
Date of Acceptance:	19 December 2022
Last Modified:	23 Jan 2024 17:48
URI:	https://orca.cardiff.ac.uk/id/eprint/155315

Actions (repository staff only)

Edit Item