Shorter than we thought: The duration of venture creation processes

Abstract

This study aims to discern the duration of venture creation processes that end in successful venture emergence as well as those ending with abandonment. Discerning duration is essential to understand a process since every process unfolds over time. However, identifying correct venture creation duration is tricky because available panel data sets in entrepreneurship are length biased toward long duration due to left truncation. In order to adjust this problem, we applied Inverse Probability Weighting (IPW) and analyzed the venture creation duration of 1673 nascent ventures in the Harmonized PSED (Panel Study of Entrepreneurial Dynamics). The weighting analyses for the duration show that the emergence chance is maximized around three months after inception of the process, implying that venture creation in the typical case is faster and simpler than previously believed. Past three months the emergence chance decreases, whereas the abandonment hazard constantly increases over time and surpasses the emergence chance after seven months. The results show that weighing strongly influences duration time estimates and also can influence other estimates based on samples using the same type of sampling mechanism. Thus we conclude that IPW should be considered for all analyses using this type of data. Our study offers a possible interpretation of the different mechanisms of emergence and abandonment and provides guidance and insights for future studies.