The Impact of Motivation, Innovation, and Causation and Effectuation Approaches on Exit Strategies

Although exit is a central part of the entrepreneurial process, most of the entrepreneurship literature has focused on the entry and growth phases of a business. Our research examines the extent to which the entrepreneur’s personal motivations, the nature of the firm’s core business idea, and venture development processes impact exit strategies. Specifically we examine the link between extrinsic and intrinsic motivation, the innovativeness of the firms’ product offerings, and causation and effectuation processes to an entrepreneur’s intended exit strategy. Our results indicate an interesting mix of predictors of various exit strategies. For instance, we find that entrepreneurs employing causation processes are more likely to pursue large liquidity events such as an IPO or a trade sale. Entrepreneurs developing highly innovative ideas also tend to pursue these large liquidity events. The sub-dimensions of effectuation are differently related to exit strategies. Experimentation is positively related to an IPO strategy. Flexibility is negatively related to liquidation, while ideas that are less innovative tend to also be connected to liquidation. Further, intrinsically-motivated entrepreneurs are less likely to pursue an IPO strategy and more likely to consider an independent sale. Extrinsically-motivated entrepreneurs are less likely to pursue an independent sale. Implications for theory are presented.