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The key to being a good entrepreneur is knowing when to give up, new research shows.
A study published online in the International Small Business Journal revealed that although persistence is a key to business success, entrepreneurs might be more prosperous if they not only understand when to start a business and take risks, but also know when to abandon it and find something that provides a greater opportunity.
"Entrepreneurs need to balance that desire to persist, which is in fact what often makes someone a successful entrepreneur, with the ability to sense when it is time to walk away," said Bobby Garrett Jr., an assistant professor of entrepreneurship at Oregon State University and co-author of the study.
As part of the study, researchers analyzed the decision-making process of 135 entrepreneurs in high-tech industries. They found that even when confronted with another business opportunity that could yield successful results, many entrepreneurs resisted quitting their current venture.
"It's escalation of commitment," Garrett said. "When an entrepreneur has invested resources into a new business, they have difficulty letting go even when things go south or another opportunity arises."
Garrett likens this thinking to that of a gambler who spends an hour at the roulette table and thinks that if he sticks with it, he can win. He said an entrepreneur's thought process is not dissimilar to this.
However, Garrett acknowledges the same doggedness is also what makes entrepreneurs successful.
"Everyone knows that entrepreneurs often fail," Garrett said. "That same persistence, and ability to keep trying against the odds, is also an admirable trait, especially when that persistence pays off."
In their study, Garrett and lead author Daniel Holland of Utah State University recommend that potential entrepreneurs keep the risk versus reward of any venture in mind, and evaluate the chances that their startup may succeed.