Success and Failure of Innovative Company Start-ups: A process-oriented analysis of psychologigal and economic determinants

The research project focuses on new firm foundations as an important vehicle for commercialising new technological knowledge. The main research question we attempt to answer refers to the conditions and determinants for success and failure of newly founded firms. Broadly categorizing we want to distinguish here individual characteristics of the firm founder(s) such as motivation, risk attitude, flexibility etc. and technological as well as economic determinants such as technological opportunities, resource availability, competitive situation, etc. Furthermore, the influence and impact of the political and institutional framework in general will be considered. Consequently we pursue an interdisciplinary approach with psychology and economics merging.
The research project is further specified along the following lines:

(1) Explicit focus on failure: As about 52% of newly founded firms fail, not only the factors and determinants for the success but explicitly those for failure are of interest. With this focus our study will provide an important contribution to the literature and ongoing political discussion where investigations into the success of newly founded firms deal nearly entirely with the successful (and therefore easy to access) cases.

(2) Process perspective: For explaining both success and failure of newly founded firms a process perspective will be taken in the sense, that in principle it is the complete history from first considerations on starting a new firm, the decision to found it and the further development that is taken into account to explain success or failure. The transformation process is divided into three steps: First, there is a population of potential founders, i.e. all current and former research associates at universities and research institutes. Some of the potential founders have an even vague idea about founding an own enterprise, the interested founders, while others do not consider those endeavours at all. Second, among the interested founders some may pursue their idea and try to get economic advice; finally some go on, the founders, others give up. Third, spin-offs or start-ups are founded, accordingly they are confronted with market competition, and they develop either with success or with a final failure. We expect from such kind of trajectory or path analysis deeper insights into the psychological and economic determinants of start-up decisions and of new firm performance.

(3) Focus on university spin-offs

The project aims at following the process of transformation of knowledge generated in public research into market value via academic spin-offs as transfer channel. This has the additional advantage that we can apply more easily the process perspective introduced above. With spin-offs from universities and other public research institutes, contrary to start-ups in general, the basic population of potential founders is accessible. Hence, beginning with potential founders/non-founders we can track down the stream to successful/failing entrepreneurs. Innovative start-ups are used as a comparison group to control for the institutional conditions at the time of business foundation.

Herewith the project will provide specific insights into

- the efficiency of soft business support and government assistance during the process of venture creation,
- the effects on employment and the quality of necessary human capital for setting up a business,
- the integration of start-ups into the innovation system and social network of the founder/team of founders.

By taking a process perspective, considering the interaction of psychological and economic factors as well as including explicitly determinants of failure, the project will contribute to the theoretical and empirical literature on start-ups in general and on academic spin-offs in particular

Prof. Dr. Rainer Silbereisen (FSU Jena, Lehrstuhl für Entwicklungspsychologie),
Prof. Dr. Gabriele Beibst (FH Jena, Fachbereich Betriebswirtschaft)

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