The purpose of this quantitative study sought to use discriminant analysis to learn if awareness of antecedent risks can improve success rates of entrepreneurs by early development of risk management strategies. The basis for this idea comes from the belief that public firms that go through underwriting have an improved chance of success. Because underwriting forces those companies to plan for early stage risk, public firms have a better chance to succeed. Discriminant analysis separates successful from unsuccessful firms by using ratio analysis. The firms in the study’s sample showed when each firm started to plan certain types of risks as noted in Securities and Exchange Commission (SEC) Form S-1. The study’s results revealed surprising information. The biggest surprise came from companies’ resistance to take part in the study because of sensitivity about disclosing information about risks. Entrepreneurial firms do consider planning for risk important, but plan for risk as needed when necessary. Other issues take on greater importance such as the window for exploiting new opportunities. The results benefit prospective entrepreneurs by offering some general guidelines for dealing with specific types of early stage risks. Little evidence exists that underwriting improved the success rates of the firms subjected to the process. This study revealed the surprising implication that firms that go public are not necessarily any better-off than firms that stay private. Holding off going public may contribute to creativity and growth conditions. Entrepreneurs may find these results important in planning for financing and development of their companies. Further study about these conditions may help confirm the results. Another study may also develop more specific guidelines for dealing with early stage risks.
|School:||University of Phoenix|
|School Location:||United States -- Arizona|
|Source:||DAI-A 72/10, Dissertation Abstracts International|
|Keywords:||Early stage, Entrepreneurship, Risk, Risk management, Success, Success rates, Underwriting|
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