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Source: University of Waterloo

UW researcher studies why some businesses succeed, while others fail

October 26, 2006

Why do some businesses succeed, while others fail?

That's the type of key question being studied by University of Waterloo researcher Moren Lévesque. A professor of management sciences, Lévesque also holds the Canada Research Chair in Innovation and Technical Entrepreneurship, funded last spring by the federal government. The position allows her to concentrate on research work.

Lévesque said that small businesses and entrepreneurial firms are essential for the long term competitiveness of Canada because they contribute significantly to the creation of employment.

She examines the relationship between survival and growth rates of new businesses. In Canada, only half of new business ventures survive for five years and by the end of a decade only 20 per cent are still in operation.

"My work on the dynamics of the growth, survival and exit of businesses will enable entrepreneurs to make better strategic decisions in the hazardous early years of a firm," she said.

She also explores intriguing questions such as: Will an economy with an old or a young population possess a different capacity for generating new businesses than one with a less skewed age distribution? What is the impact of entrepreneurial activity on economic growth and what role does entrepreneurial activity play depending on the degree of a country's development?

Lévesque collaborates with colleagues across Canada and elsewhere to develop models that will help answer such questions and deepen understanding of entrepreneurial decision-making.

While poorer countries confront unprecedented increases in population and several developed ones see their populations age, her research will help policy-makers understand the relationship between demographic structures, entrepreneurship and economic growth. As a result, she and her collaborators will be better able to help Canadian firms stay open for business.

While the field of entrepreneurship has seen numerous research developments, it still lacks a definition of its own domain as "theories of entrepreneurship are almost non-existent," Lévesque said.

"This research is likely to stimulate innovative crosscutting, interdisciplinary research on societal problems and has the potential to impact public decision-making and actions."

Lévesque's research interests cover describing and prescribing decision-making in new business formation, which she considers crucial to increasing the likelihood of a firm's survival. She explores time-allocation decisions between waged labour and entrepreneurial activities over a person's career, along with time and financial allocation decisions of entrepreneurs and their stakeholders.

"As new technologies are developing at an astonishing rate and technology transfer has been facilitated in numerous institutions, the assessment of business prospects -- that is, the decision to accept or reject a prospect -- has become popular among prospective entrepreneurs," Lévesque said, adding that she investigates this go/no-go decision.



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