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The new venture mortality myth

Levie, J.D. and Don, G. and Leleux, B. (2011) The new venture mortality myth. In: Handbook of Research on New Venture Creation. Edward Elgar, pp. 194-215. ISBN 9781847200952

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Abstract

This chapter reviews the literature on perceptions and measures of new business mortality, and notes wide and persistent gaps between perceptions and measures. Official statistics suggest that survival rates of new businesses in advanced economies tend to be around 80% after one year and around 50% after five years. Failure rates appear to be around half to a third of the inverse of the survival rate, depending on how failure is defined. A survey of estimates on the world wide web found the most quoted failure rate was 50% after one year. Explanations for this gap between perception and official statistics include the way firm births are measured, vested interests, and misleading referencing. Using the UK as an example, it is estimated that nascent entrepreneurship rates could be increased by a third if people knew the true failure rate for new businesses.