This article theorizes how short-term revenue volatility affects new venture viability and how such volatility develops over time. Tracking the bank accounts of 6,578 new ventures over a 10-year period, we find that, even after controlling for a range of other factors, short-term revenue volatility is a strong predictor of venture exit. Although short-term revenue volatility is associated with the depletion of buffer resources and financial default, surviving ventures do not, on average, decrease their short-term revenue volatility over time. However, short-term revenue volatility decreases at the cohort level due to higher exit rates of volatile ventures.
- liability of newness
- evolutionary theory
- liability of smallness
Lundmark, E., Coad, A., Frankish, J. S., & Storey, D. (2020). The Liability of volatility and how it changes over time among new ventures. Entrepreneurship: Theory and Practice, 44(5), 933-963. https://doi.org/10.1177/1042258719867564