Serial Entrepreneurship
Serial Entrepreneurship Theory: Why Founders Build Again and Again
Serial entrepreneurship refers to the repeated behavior of starting new ventures. However, in the academic literature, the distinction is more specific. Plehn-Dujowich (2010) categorizes founders into two main groups:
- Novice Entrepreneurs: Individuals launching a business for the first time.
- Habitual Entrepreneurs: This group includes Serial Entrepreneurs (who launch businesses sequentially) and Portfolio Entrepreneurs (who run multiple businesses concurrently).
The Learning Curve Advantage
Plehn-Dujowich argues that serial entrepreneurs differ substantially from first-time founders because they develop new capabilities over time. Experience allows them to develop heuristics (mental shortcuts) that guide their decision-making processes.
While a novice might suffer from "analysis paralysis," a serial entrepreneur can assess risks quickly and effectively. These cognitive advantages lead to equal or higher success rates and a higher likelihood of sticking to entrepreneurship as a lifelong career choice.
Businesses as "Stepping Stones"
Serial entrepreneurship theory relies on the decision to stay, exit, or re-enter. For the serial founder, each business is a stepping stone to the next—a means to an end, not an end in itself.
This perspective leads to a critical policy implication: Reducing the cost of shutting down a business is just as important as reducing the cost of starting one. If exit barriers are high, serial entrepreneurs cannot move on to their next, potentially more successful, venture.
Serial vs. Portfolio: A Question of Timing?
Are serial entrepreneurs simply portfolio entrepreneurs who lack the time to multi-task? Sarasvathy, Menon, & Kuechle (2013) suggest exactly that.
They argue that serial entrepreneurship is essentially "temporal portfolio entrepreneurship." Most entrepreneurs might wish to launch multiple businesses (a portfolio), but the cognitive load is too high to manage them simultaneously. Therefore, they prefer to learn from each experience sequentially rather than dealing with too many variables at once.
References
Plehn-Dujowich, J. (2010). A theory of serial entrepreneurship. Small Business Economics, 35(4), 377-398.
Sarasvathy, S. D., Menon, A. R., & Kuechle, G. (2013). Failing firms and successful entrepreneurs: Serial entrepreneurship as a temporal portfolio. Small Business Economics, 40(2), 417-434.
