http://www.smallbusinessinstitute.biz A B S T R A C T Keywords: Journal of Small Business Strategy 2019, Vol. 29, No. 01, 99-114 ISSN: 1081-8510 (Print) 2380-1751 (Online) ©Copyright 2019 Small Business Institute® w w w. j s b s . o rg Why do some business owners profess greater personal commitment to their businesses than others? Similarly, why do other owners indicate greater re- luctance to sell or close their businesses than others? And, finally, why do some owners work harder in their businesses than others? Answering these questions would help scholars better comprehend the complex relationship between owner persistence intentions, owner exit decisions, and business failure (DeTienne & Cardon, 2012). How- ever, while business failure and owner exit decisions have been extensively examined in the literature, rela- tively little research has been conducted on owner per- sistence intentions (Holland & Shepherd, 2013). Fail- ure research finds that businesses terminate primarily due to a lack of adequate planning or poor operating skills on the part of the firm’s owner (Chen, 2015). Specifically, little business planning, inadequate finan- cial resources, and limited market knowledge or inad- equate response to issues such as competition, rapid growth, financial management, and acute problems cause business failure (Tocher & Rutherford, 2009; Wennberg, Wiklund, DeTienne, & Cardon, 2010). Further, the literature contends that most of this failure could be avoided if owners were simply better prepared and more knowledgeable (Aldrich & Martinez, 2001; Williams Jr., Manley, Aaron, & Daniel, 2018). Failure research thus implies that business owners often sim- ply lack the skillset needed to launch and operate suc- cessful firms (Holland & Garrett, 2015), leading to as many as 90% of all businesses failing (Kessler, 2014). Conversely, research on business ownership exit finds that failure rates are not as high as previ- ously thought because many businesses that are sim- ply closed, sold, combined with other businesses, and restructured into different ownership forms are often misclassified as “failed” businesses (Small Business Facts, 2012; Wagner, 2013). Supporting the above no- tion, scholarly research finds that individuals make exit decisions for myriad reasons not related to planning or operations (e.g. Hsu, Wiklund, Anderson, & Coffey, 2016). For example, many owners exit smoothly op- erating and profitable businesses for reasons such as Introduction Greg Murphy1, Neil Tocher2, Tyler Burch3 1Idaho State University, USA, murpgreg@isu.edu 2Idaho State University, USA, tochneil@isu.edu 3Idaho State University, USA, burctyle@isu.edu Small business owner persistence: Do personal characteristics matter? Persistence intentions, Owner characteristics, Business failure, Exit, Opportunity recognition Recent research suggests that (1) business failure rates are lower than previously thought and (2) business owners exit businesses for myriad reasons besides performance. Despite these findings, relatively little is known about whether personal characteristics (i.e. ex- pectations, competencies, education) of small firm owners influence their likelihood to persist with business ownership. Given this gap, the present study investigates the relationship between owner characteristics and persistence intentions. Framed by threshold theory, we theorize and test whether owner growth expectations, satisfaction, education, competencies, and financial investment influence their persistence intentions. Results indicate that owner future growth expectations for the business, their opportunity recognition abilities, and their satisfaction with the business significantly impact persistence intentions. Implications of study findings are discussed. APA Citation Information: Murphy, G., Tocher, N., & Burch, T. (2019). Small business owner persistence: Do personal characteristics mat- ter? Journal of Small Business Strategy, 29(1), 99-114. http://www.smallbusinessinstitute.biz http://www.jsbs.org 100 G. Murphy, N. Tocher, T. Burch Journal of Small Business Strategy / Vol. 29, No. 1 (2019) / 99-114 work-life balance, pursuit of better or different oppor- tunities, retirement, cashing out, and risk avoidance (e.g. Justo, DeTienne, & Sieger, 2015). Further, owners vary greatly in their level of persistence, causing some owners to persist when others would exit (DeTienne, 2010). Given this, it appears that owner discretionary behavior has a great deal to do with whether or not a business should be counted as a failure and this dis- cretionary behavior is often not related to the owner’s planning and operational proficiencies (Burke, Fitzroy, & Nolan, 2008). Additionally, it seems that the exit literature suggests that while owners’ persistence lev- els vary, many business exit decisions are misclassified as failures which should instead be classified as dis- cretionary exits by owners considering many factors such as opportunity cost and life stage (Wagner, 2013). That said, understanding the owner characteristics and- persistence intentions relationship would help scholars determine what types of owners are more likely to fail due to planning and operational weaknesses and what owners are likely to exit for opportunity cost and life- style reasons (DeTienne & Cardon, 2012; Holland & Garrett, 2015). Unfortunately however, this discre- tionary persistence behavior is not well understood in the scholarly literature. Given this perplexing gap, we empirically examine the relationship between small firm owner characteris- tics and persistence intentions. Framed by threshold theory and using a sample of 380 small manufacturing businesses, we theorize and test the notion that own- er growth expectations, satisfaction, education, com- petencies, and personal financial investment will be positively associated with persistence intentions. Our study contributes to the literature by being one of the first studies of the owner characteristics/persistence intentions relationship. As such, study findings will start to shed light on what types of business owners are likely to fail, persist, and voluntarily exit. Theoretical Framework Threshold theory Threshold theory asserts that owners have a cog- nitive performance threshold which they constantly compare to their firm’s actual financial performance, using this comparison to make decisions about the firm’s future (Gimeno, Folta, Cooper, & Woo, 1997). The theory thus asserts that all owners have different performance thresholds and they will often use the per- formance threshold/actual performance comparison to make the persist/exit decision (DeTienne & Chirico, 2013). As such, owners will likely persist if perfor- mance is above the threshold and are likely to exit if performance is below the threshold (Zellweger, Na- son, Nordqvist, & Brush, 2013). Importantly howev- er, legitimacy research suggests that the performance threshold and the owner persist/exit decisions arising from it are highly dependent upon whether the owner feels key stakeholders have granted the owner’s firm legitimacy (Nagy, Rutherford, Truong, & Pollack, 2017). Research suggests that small firms must first be granted legitimacy by critical stakeholders before they will gain consistent access to resources needed to sur- vive and grow (Rutherford, Buller, & Stebbins, 2009). As such, owners who do not feel they have been grant- ed legitimacy by critical stakeholders they deem neces- sary for future survival and growth may be more likely to exit regardless of current or potential financial per- formance (Mitteness, Baucus, & Norton, 2013). Since stakeholders have many options regarding which firms to legitimize and not legitimize, key stakeholders (i.e. large investors, significant customers) often control specific market segments because legitimized firms will expect to survive and non-legitimized firms will expect to fail (Peake & D’Souza, 2015). Hence, owner performance thresholds and associated persistence/exit decisions may be as dependent upon whether critical stakeholders have deemed the firm legitimate as they are on pure financial performance (Mitteness et al., 2013; Nagy et al., 2017). Such a perspective provides an alternative explanation for the prevailing belief in the literature that owners exit firms due primarily to the firm’s financial performance and therefore helps explain why owners with high performing firms may exit and owners with low performing firms may persist (Brauer, 2006; Peake & D’Souza, 2015). Notably, an owner’s performance threshold is built up over time through a combination of a variety of personal char- acteristics (i.e. growth expectations, satisfaction, and education) which change and adapt (DeTienne & Car- don, 2012). Therefore, threshold theory provides a foundation for the notion that owner characteristics influence per- formance intentions because such characteristics com- bine to create the performance threshold which guides the persist/exit decision (DeTienne & Chirico, 2013). Importantly, several owner characteristics combine to form the acceptable performance threshold in an owner’s mind (DeTienne, 2010). As such, an owner with high growth expectations that is operating a firm which is profitable, but no longer growing, is likely to exit while a different owner operating a similarly profitable firm with less growth expectations will be much less likely to voluntarily exit (Gimeno et al., 1997). However, if the owner with high growth ex- 101 G. Murphy, N. Tocher, T. Burch Journal of Small Business Strategy / Vol. 29, No. 1 (2019) / 99-114 pectations operating the profitable low growth firm is also highly satisfied with the firm for several other rea- sons (i.e. legitimization by key stakeholders, lifestyle, freedom, business location, effort required) that own- er may be moderately persistent (Nagy et al., 2017; Peake & D’Souza, 2015). Hence, owner characteris- tics are the building blocks of performance thresholds that influence persistence intentions (Zellweger et al., 2013). Thus, an examination of owner characteristics and persistence intentions is needed to articulate what characteristics may be critical pieces of owner perfor- mance thresholds and what characteristics may not be as influential on such thresholds (DeTienne & Chirico, 2013). Given this, we next define persistence, com- pare it with exit, and outline several important owner characteristics that previous literature suggests are per- sistence indicators. Persistence Persistence has been defined as the continuation of effortful action despite failures, impediments, or threats, either real or imagined (Gimeno et al., 1997). As such, the decision to continue may be affected by the evaluation of positive alternatives and thus owner persistence may be considered as the decision to con- tinue with a venture given different motivational forc- es (Holland & Shepherd, 2013). Owner persistence is logically related to owner exit, defined as “the process by which the founders of privately held firms leave the firm they helped create; thereby removing them- selves, in varying degree, from the primary ownership and decision-making structure of the firm” (DeTienne, 2010, p. 203). While owners may exit their businesses for myriad reasons, differences in persistence levels of owners should impact business exit (Holland & Garrett, 2015). Although scholars generally agree that business owners are, on average, very persistent in pursuing the interests of their firms (Digan, Kerrick, Cumberland, & Garrett, 2017), there is considerable variance in the level of persistence demonstrated by individual own- ers (Justo et al., 2015). Some owners dedicate their whole lives to the pursuit of ensuring the success of their businesses, involving themselves so intensely in their firms that their evaluations of self-worth become very closely tied to their businesses performance (Os- wald, Muse, & Rutherford, 2009). Conversely, other owners may be considerably less committed to their firms for reasons such as other career alternatives (e.g. Burke et al., 2008), work life balance issues (e.g. Justo et al., 2015), and changing market dynamics (e.g. Hsu et al., 2016). Further, some owners may be more con- cerned with outcomes associated with business own- ership such as financial rewards, respect, or lifestyle instead of owning a specific business (Holland & Gar- rett, 2015), making such owners more likely to jump to another business when a more attractive alternative is discovered (Wennberg et al., 2010). Still other own- ers may view business ownership as a temporary state, preferring to return to a corporate existence as soon as the opportunity presents itself (DeTienne, 2010). The level of adversity faced by owners also has an im- pact on the persistence decision with persistence being more likely during periods of less adversity and less likely during periods of high adversity (Gibson, 2010; Pett & Wolff, 2016). Despite high level interest in the topic, previous research has rarely assessed persistence in terms of ef- fort and commitment of small business owners. Rath- er, seminal research by Gimeno et al. (1997) assessed persistence as the simple percentage of businesses dis- continued during a given time period, which implicitly assumes each firm which discontinued did so due to a lack of owner persistence (Baum & Locke, 2004). Other studies (e.g. DeTienne, Shepherd, & De Castro, 2008; Holland & Garrett, 2015) have used conjoint experiments which present owners with scenarios and asks them to indicate their persistence intentions given a contrived situation. While such studies are very in- teresting and informative, they are only relevant to the point that the contrived scenarios actually happen to the studied owners (Cardon & Kirk, 2015). Important- ly however, research also suggests owner commitment and effort are significant persistence indicators (Baum & Locke, 2004; Digan et al., 2017; Pett & Wolff, 2016). Supporting this perspective, small business research finds that owners who take jobs outside the firms they own (suggesting less effort and commitment to their firms) are significantly more likely to exit their firms (Wennberg et al., 2010). Further, research indicates that organizational commitment is negatively related to turnover (e.g. Cannon & Herda, 2016). Notably, the negative relationship between commitment and turnover is likely even more applicable to small busi- ness owners given the financial constraints they typi- cally face (Rutherford, Tocher, Pollack, & Coombes, 2016). Finally, research indicates that owners who carefully integrate goal setting, strategic planning, and financial analysis are more committed to business out- comes than owners who fail to integrate such activities (Williams Jr. et al., 2018). Given the above, we as- sess persistence via owner commitment and effort. As such, we next outline characteristics which previous literature suggests are positively associated with own- er persistence prior to testing the owner characteristics 102 G. Murphy, N. Tocher, T. Burch Journal of Small Business Strategy / Vol. 29, No. 1 (2019) / 99-114 persistence intentions relationship. Future Expectations and Persistence Research indicates a significant relationship be- tween owner expectations and persistence intentions (Dutta & Thornhill, 2014; Rita, Priyanto, Andadari, & Haryanto, 2018). Specifically, it has been argued that the decision to persist “is primarily determined by assessing the desirability of the potential outcomes of the opportunity and the probability of achieving those outcomes” (Holland & Shepherd, 2013, p. 334). Empirical research provides support for the above as- sertion as studies find that expected financial success leads to both business owner effort and continued busi- ness ownership (e.g., Renko, Kroeck, & Bullough, 2012). Similarly, owners who have positive percep- tions of the operating environment are more likely to persist with firm operation (DeTienne et al., 2008). Finally, a series of studies comparing entrepreneurial aspirations against expected financial and non-finan- cial rewards found a consistent relationship between expected outcomes and persistence intentions (Hol- land & Garrett, 2015). Given these results, it appears that owners will be more likely to persist if they ex- pect their efforts to lead to desired outcomes and will be less motivated to persist in business ownership as such expectations weaken. As such, we posit that owner future expectations of rewards will enhance persistence intentions and thus advance the following: Hypothesis 1. Owner future expectations will enhance persistence intentions such that the more rewards the owner expects to receive, the more likely the owner will be to persist with business ownership. Satisfaction and Persistence Several lines of research indicate a positive as- sociation between owner satisfaction and persistence intentions. First, organizational behavior research has found that satisfied employees have much lower turn- over intentions (Rubenstein, Eberly, Lee, & Mitchell, 2015) and higher organizational commitment (Har- rison, Newman, & Roth, 2006). By extension, it is likely that satisfied owners will be more committed to their firms and less likely to sell or close their busi- nesses. Similarly, research finds strong evidence that satisfaction reduces employee absenteeism (Schaum- berg & Flynn, 2017) suggesting that satisfied owners will work more and thus have higher persistence in- tentions. Further, family business research finds that owner satisfaction resulting from meeting expectations and reaching profitability goals enhances persistence intentions (Oswald et al., 2009). Finally, social capital research indicates that business owners who are satis- fied with their networking groups are more committed to their firms (Pollack, Coy, Green, & Davis, 2015), acquire more resources (Davidsson & Honig, 2003), and are better able to adapt their firms for long term success (Stam & Elfring, 2008). Given the above find- ings, we posit that owner satisfaction is positively as- sociated with persistence intentions and thus advance the following: Hypothesis 2. Owner satisfaction will enhance per- sistence intentions such that the more satisfied the owner, the more likely the owner will be to persist with business ownership. Education and Persistence Research suggests a strong positive association between education and owner persistence intentions. For example, educated owners tend to choose more ef- fective business strategies, often gravitating towards a combination of high innovation and low risk (Sonfield & Lussier, 2014). Additionally, owner education has been found to enhance human capital, which in turn leads to increased likelihood of starting and operating a high performing new venture (DeTienne & Cardon, 2012). Similarly, studies find that educated business owners are more likely to possess enhanced critical thinking skills, which help them better navigate the challenges associated with operating a business in an increasingly complex environment (Tocher & Ruth- erford, 2009). Further, educated business owners are better able to develop social capital (e.g. Davidsson & Honig, 2003) and acquire tangible resources (Greve, 2009), which should make them more likely than less educated owners to persist with business ownership (e.g. Lechner, Dowling, & Welpe, 2006). Supporting the above notion, better educated owners were found to be much less likely to close their businesses than less educated owners (Coleman, Cotei, & Farhat, 2013). Finally, seminal research suggests that educa- tion likely enhances owner persistence intentions as studies found that owner formal education enhanced firm performance, decreased owner exit, and increased owner commitment (Cooper, Folta, Gimeno-Gascon, & Woo, 1992; Gimeno et al., 1997). The above sug- gests that educated owners will be more likely to per- sist with business ownership and thus we advance the following: Hypothesis 3. Owner education will enhance per- sistence intentions such that the more educated the owner, the more likely the owner will be to persist with business ownership. 103 G. Murphy, N. Tocher, T. Burch Journal of Small Business Strategy / Vol. 29, No. 1 (2019) / 99-114 Competencies and Persistence Owner competencies (i.e. self-efficacy, opportu- nity recognition ability, managerial skill) are defined here as high order proficiencies which afford owners the chance to successfully operate their businesses (Man, Lau, & Chan, 2002). These competencies can be classified as personal or general in nature (Baum, Locke, & Smith, 2001), meaning that they relate more to the competencies of the owner than to the business and can thus be applied to different settings as opposed to being limited to a specific business (Frey & Rupert, 2013). Research suggests that owner competencies will enhance persistence intentions. For example, stud- ies find that owner self-efficacy is positively associat- ed with persistence intentions and perceived success (Cardon & Kirk, 2015; Gibson, 2010) while seminal research found that competencies such as managerial skill, political savvy, and opportunity recognition abili- ty enhance owners chances to operate high performing firms (Chandler & Jansen, 1992). Such competencies are also positively associated with owner satisfaction (Shane, Locke, & Collins, 2003) and owners’ chances to establish innovative firms (Mohsin, Halim, Ahmad, & Farhana, 2017). Given these findings along with the logical argument that competent owners are more like- ly to operate successful firms that are more desirable to own, we posit that owner competencies will enhance persistence intentions. As such, the following is ad- vanced: Hypothesis 4. Owner competencies will enhance per- sistence intentions such that the more competencies the owner possesses, the more likely the owner will be to persist with business ownership. Owner Personal Investment and Persistence Owner personal investment in the business is also expected to enhance persistence intentions. Spe- cifically, research finds that a high level of personal investment is positively associated with persistence intentions, particularly for underperforming firms (DeTienne et al., 2008). This somewhat counter intui- tive finding is actually consistent with self-justification theory in that attitudes may be biased to justify past behavior, leading owners to feel that their reputations depend on the success or failure of their business (De Clercq & Voronov, 2009). Persisting in operating an underperforming firm is also aligned with the escala- tion of commitment phenomena (Staw, 1981), in that owners may find themselves in a situation where the more they invest in a business, the less willing they are to give up on a business (Stam & Elfring, 2008). Con- versely, research also finds that firms with high owner equity percentages experienced fewer financial diffi- culties during their early years (Tost, 2011) suggesting that owners will persist because a firm with fewer fi- nancial difficulties is more desirable to continue own- ing (Oswald et al., 2009). Finally, large owner invest- ment also likely enhances owner persistence intentions because a high personal financial stake in the business likely motivates an owner to work harder for a longer time period to justify the investment (Cardon & Kirk, 2015). Since research indicates that large owner finan- cial investments enhance persistence regardless of firm performance, we advance the following: Hypothesis 5. Owner personal investment will en- hance persistence intentions such that the higher the owner’s personal investment, the more likely the own- er will be to persist with business ownership. Method Data was gathered from a sample of small man- ufacturing businesses in Harris County, Texas. All of the firms sampled were listed in either the Dun & Bradstreet Regional Directory-Houston, the Directo- ry of Texas Manufacturers, or the State of Texas Sales Tax Files. Firms were eligible for sample inclusion from each of the sources if they were located in Harris County, were privately and independently owned, and had fewer than 500 employees. This process resulted in a total of 1,891 firms being selected for sample in- clusion. The survey was sent out twice and then fol- lowed up by a reminder to all potential participants. Of the 1,891 firms that were sent a survey, 109 were returned as undeliverable and could not be contacted by telephone, 34 of the businesses indicated they had an established policy of not participating in studies, 23 of the businesses were later found to be located outside Harris County, 16 of the businesses were no longer in operation, 10 businesses were discovered to be branch- es of larger corporations, and one firm failed to meet the pre-established criterion of having less than 500 employees. Of the 1,698 firms eligible to respond, po- tentially usable responses (i.e., responses with at least some potentially usable data) were returned by 369 of the businesses, resulting in a 21.73%response rate. Of these 369 potentially useable responses, the number of responses containing a complete set of variables nec- essary for current analyses ranged from 280 to 283 de- pending on the dependent variable being analyzed. 104 G. Murphy, N. Tocher, T. Burch Journal of Small Business Strategy / Vol. 29, No. 1 (2019) / 99-114 Persistence Intentions Owner commitment, owner willingness to sell or close the business, and owner effort were each mea- sured as proxies of persistence intentions. These three measures are acceptable metrics of the construct and should serve as strong indicators of persistence inten- tions (Holland & Garrett, 2015). Commitment was as- sessed by 6 items similar to those used by Kanning & Hill (2013). Cronbach’s alpha for the items used was .75, which is considered acceptable by conventional standards (Cohen, Cohen, West, & Aiken, 2003). To measure owner willingness to sell or close a business, the respondents were asked to indicate whether they would sell or close their business if annual sales were changing at 8 different rates ranging from decreasing 75% annually, decreasing 50% annually, decreasing 25% annually, decreasing 10% annually, increasing 10% annually, increasing 25% annually, increasing 50% annually, and increasing 75% annually. The highest level of change in sales at which the respon- dent indicated they would be willing to voluntarily sell or close their business (i.e. sales increasing 50% annually) was used as a proxy for willingness to sell/ close. Effort level was measured as the average hours per week worked on the business by the owner. The respondent was asked to provide the average hours per week worked on the business over the past year to help control for the effects of seasonal demand. Owner Characteristics The five owner characteristics of future expec- tations, satisfaction, education level, competency, and personal investment were assessed in this study. Future expectation was measured as the percentage change between expected future annual sales and cur- rent annual sales. Satisfaction was measured by asking respondents to assess their satisfaction with the profit- ability, growth, and productivity of the business by in- dicating their feelings on a five point Likert-type scale ranging from very satisfied to very dissatisfied. The three satisfaction measures were combined to form one overall measure of satisfaction. The Cronbach’s alpha for the three satisfaction measures was .71, which is considered acceptable by conventional standards (Co- hen et al., 2003). Education level was measured as the highest degree earned by the respondent ranging from high school or GED to doctorate. Opportunity recog- nition (Cronbach’s alpha = .71), political savvy (Cron- bach’s alpha = .59), and managerial skills (Cronbach’s alpha = .75) competencies were assessed via items similar to measures used by Mitchelmore & Rowley (2013). Personal financial investment was measured as the owner’s total equity in the business. Further details on specific items used for each measure are contained in the Appendix. Control Variables Firm size, firm age, owner gender, owner minority status, and owner annual compensation from the busi- ness were all controlled for in the study. Firm size was measured as the composite of the standardized scores for the number of full-time equivalent employees of the business and the total assets of the business. Firm age was measured as the number of years since the business had its first sale. Gender was dummy coded with 1 = male and 2 = female. Minority status was also dummy coded with 1 = minority owner and 0 = non-mi- nority owner. Total annual owner’s compensation was measured in categories with 1 = less than $10,000, 2 = between $10,000 and $24,999, 3 = between $25,000 and $49,999, 4 = between 50,000 and $74,999, 5 = be- tween $75,000 and $124,999, 6 = between $125,000 and $249,999, 7 = between $250,000 and $999,999, and 8 = more than $1,000,000. Results The means, standard deviations, and correlation coefficients of the variables used in this study are pre- sented in Table 1. The criteria used to select firms for inclusion into the sample provided considerable diver- sity within the total sample on key characteristic vari- ables. Notably, firm size was a composite measure of full time equivalent employees (mean = 23.65) and to- tal assets (mean = $1,502,548). To test the hypotheses, multiple regression analy- sis was used. The results of the analysis are presented in Table 2. The model tested had a significant overall effect, as measured by the F test, on commitment (p < .001) and on effort (p < .01). The model also had a marginally significant effect on the entrepreneur’s willingness to sell or close the business (p < .10). Own- er compensation was positively related to owner effort (p < .10), suggesting that higher compensated owners worked more in their businesses than less compensated owners. Mixed support was found for the hypotheses. Hy- pothesis 1, which predicted that owner expectations would be positively associated with persistence inten- tions was supported. The hypothesis was tested by re- gressing growth expectations on owner commitment, effort, and willingness to sell/close the firm. Positive associations between expectations/commitment and 105 G. Murphy, N. Tocher, T. Burch Journal of Small Business Strategy / Vol. 29, No. 1 (2019) / 99-114 Table 1 Means, standard deviations, and correlation coefficients Mean SD 1 2 3 4 5 6 7 8 9 10 11 12 13 14 1. Firm Sizea .00 2.56 2. Firm Age 17.88 15.25 .18*** 3. Gender 1.09 .32 -0.11* .01 4. Min. Status .14 .35 -.01 -.16** -.02 5. Commitment 4.31 1.75 .40*** .21*** -.20*** -.14** 6. Commitment 24.43 4.24 .13* .05 .02 .02 .21*** 7. Sell or Close -43.82 55.67 -.03 .10† .07 -.04 -.03 -.16** 8. Effort 44.91 19.61 .04 .00 .01 .06 .06 .00 -.04 9. Growth Expect .76 3.56 -.05 -.09† .03 .12* -.19*** -.06 -.10† .16** 10. Satisfaction 9.93 2.73 .07 -.01 .01 -.10† .33*** .40*** -.17*** .01 -.03 11. Education 2.51 1.21 .18*** -.05 -.14** .09† .04 -.08 .05 .06 .11* -.14** 12. Manage. Skill 15.37 2.57 .04 .08 .04 .02 .08 .13* -.04 -.06 .00 .30*** .01 13. Political Savvy 7.48 1.53 .06 .11* -.05 -.06 .16** .13* .00 .01 -.06 .27*** -.06 .49*** 14. Oppor. Recog. 11.70 2.29 .04 .02 -.04 .11* .02 .14** -.04 .16** .01 .19*** .03 .29*** .32*** 15. Personal Invest 577111 1428623 .61*** .15** -.11* -.03 .38*** .11* .04 -.07 -.05 .10† .07 .01 .06 .09† aFirm size is a composite measure of standardized scores of full time equivalent employees (mean = 23.65) and total assets (mean = $1,502,548). Correlations were performed using listwise deletion; N = 280 † Significant at .10 * Significant at .05 ** Significant at .01 *** Significant at .001 106 G. Murphy, N. Tocher, T. Burch Journal of Small Business Strategy / Vol. 29, No. 1 (2019) / 99-114 expectations/effort, along with a negative association between expectations/willingness to sell or close indi- cate support for Hypothesis 1. Results find marginal support for the expectations/commitment relationship (p < .10), marginal support for the expectations/will- ingness to close/sell relationship (p < .10), and sup- port for the growth expectations/effort relationship (p < .05). Such results do indeed suggest that the higher future growth expectations, the more likely owners are to persist with business ownership. In particular, the finding that future growth expectations is strong- ly associated with effort indicates that either owners adjust their effort levels to match their expectations of future growth or that future expectations are adjusted to match the effort of the owner. Hypothesis 2, which predicted that owner sat- isfaction would be positively associated with per- sistence intentions was partially supported. The hy- pothesis was tested by regressing satisfaction on owner commitment, effort, and willingness to sell/close the firm. Positive associations between satisfaction/com- mitment and satisfaction/effort, along with a negative association between satisfaction/willingness to sell or close provide support for Hypothesis 2. Results Table 2 Regression of control and independent variables on proxies for persistence intentions (i.e., commitment, will- ingness to sell or close the business, and effort) Proxies of Persistence Intentions Commitment Sell or Close Effort N = 283 N = 282 N = 280 Commitment Sell or Close Effort N = 283 N = 282 N = 280 Firm Size .09 -.12 .03 Firm Age .07 .07 -.01 Gender .01 .08 .05 Minority Status .07 -.05 .06 Owner’s Compensa- tion .06 .04 .11† Growth Expectations .09† -.11† .14* Satisfaction .34*** -.21** -.01 Education Level -.05 .05 .09 Managerial Skill .01 -.05 -.18** Political Savvy .03 .07 .01 Opportunity Recogni- tion Ability .06 .03 .22*** Personal Investment -.01 .10 -.13† F 5.08*** 1.70† 2.41** R2 .18 .07 .10 Standardized Estimates Reported † Significant at .10 * Significant at .05 ** Significant at .01 *** Significant at .001 107 G. Murphy, N. Tocher, T. Burch Journal of Small Business Strategy / Vol. 29, No. 1 (2019) / 99-114 demonstrate strong support for the satisfaction/com- mitment relationship (p < .001), strong support for the satisfaction/willingness to sell or close relationship (p <.01), and no support for the satisfaction/effort rela- tionship (p > .10). These results provide partial support for the notion that satisfied owners will be more likely to persist with business ownership. Interestingly, sim- ilar to employees, satisfied owners appear to be more committed and less likely to turn over (e.g. Rubenstein et al., 2015). That said, the lack of any significant re- lationship between owner satisfaction and effort level also suggests that like employees, owners’ satisfaction seems to have little influence on effort (e.g. Harrison et al., 2006). Hence, owners may be highly satisfied with owning a firm for many reasons, but this satisfaction may not indicate any willingness on owners’ parts to expend more effort on a firm which they are already satisfied to own. Hypothesis 3, which predicted that owner edu- cation level would be positively associated with per- sistence intentions was not supported. The hypothe- sis was tested by regressing education level on owner commitment, effort, and willingness to sell/close the firm. Positive associations were proposed between ed- ucation/commitment and education/effort, along with a negative association between education/willingness to sell or close. Interestingly, results find no support for any of the proposed relationships (p > .10). While previous research suggests a positive association be- tween education and persistence, that relationship may not have emerged here due to factors such as opportu- nity cost differences between more educated and less educated owners, performance threshold differences between less educated and more educated owners, and business valuation differences between less educated and more educated owners. In addition, perhaps the re- lationship between education and persistence is weak- er than previous studies suggest. Hypothesis 4, which predicted that the owner competencies of managerial skill, political savvy, and opportunity recognition ability would be positively as- sociated with persistence intentions was partially sup- ported. The hypothesis was tested by regressing the three competencies on owner commitment, effort, and willingness to sell/close the firm. While no support was found for the competency/commitment and com- petency/willingness to sell relationships, support was found for the competency/effort relationship as op- portunity recognition ability was positively associated with effort (p < .001). This observation is however complicated by the fact that political savvy and effort were not significantly related and managerial compe- tency and effort were significantly negatively related (p < .01). In other words, owners with high opportunity recognition abilities appear to work more while owners who are highly skilled managers appear to work less. A possible explanation for these contradictory findings may be that it takes more effort to identify opportuni- ties, but owners that are highly skilled managers can use that ability to work less hours. Specifically, it may be that owners who work more hours in their business- es are better at identifying opportunities as a result of their increased contact with suppliers, employees, and customers. Similarly, owners who work more hours in their businesses may also be more attuned to environ- mental and industrial conditions, giving them anoth- er advantage in recognizing opportunities. However, owners who possess greater managerial competence may make more efficient use of their time through proper delegation, allowing them to work fewer hours, perhaps explaining the negative relationship between managerial skill and effort. Hypothesis 5, which predicted that owner per- sonal investment would be positively associated with persistence intentions was largely not supported. The hypothesis was tested by regressing personal invest- ment on owner commitment, effort, and willingness to sell/close the firm. Our results find no support for the personal investment/commitment or the personal investment/willingness to sell or close relationships and only marginal support for the personal investment/ effort relationship (p < .10). In summary, results suggest that owners with higher future expectations, satisfaction levels, and who are skilled at recognizing opportunities will be likely to persist with business ownership. Converse- ly, investment and education of owners likely has little association with persistence. Such results suggest that optimistic, satisfied, and alert individuals may be more willing to operate businesses for longer time periods, indicating that research may want to investigate how to convince such individuals to undertake small business ownership. Discussion Research suggests that a complex relationship ex- ists between owner persistence intentions, owner exit decisions, and business failure (DeTienne & Cardon, 2012). While failure research suggests that business termination primarily results from a lack of planning and operating skills on the part of owners (e.g. Chen, 2015), exit research suggests that owners often vol- untarily exit successful businesses for myriad reasons such as work life balance, cashing out, and pursuit of other opportunities (e.g. Justo et al., 2015). Notably 108 G. Murphy, N. Tocher, T. Burch Journal of Small Business Strategy / Vol. 29, No. 1 (2019) / 99-114 however, such research has focused little attention on owner persistence intentions, leaving scholars to pon- der whether certain individuals are more likely than others to persist with business ownership. Given this gap, the present paper provides one of the first exam- inations of the relationship between owner character- istics and persistence intentions. Using a sample of 380 small manufacturing firms, we find future expec- tations, satisfaction, and opportunity recognition abili- ties to be positively associated with owner persistence intentions, suggesting that optimistic, alert, and sat- isfied individuals may be more likely to persist with business ownership than comparable others who are less optimistic, alert, and satisfied. As such, study findings have several important implications. Perhaps the key implication of our study is that personal characteristics of the business owner are an important factor that influences the discretionary persist/exit decision. Our study suggests that owners who expect their firms to do well, are satisfied with operating their firms and who have a strong ability to recognize opportunities are more likely to persist with operating a business which could either be exited or kept in operation. Importantly, exit research indi- Table 3 Summary of hypotheses and findings Hypothesis Findings Hypothesis 1. Owner future expectations will en- hance persistence intentions such that the more re- wards the owner expects to receive, the more likely the owner will be to persist with business ownership. • Marginal support for the expectations/commitment rela- tionship (p < .10) • Marginal support for the expectations/willingness to sell or close relationship (p < .10) • Support for the growth expectations/effort relationship (p < .05) Hypothesis 2. Owner satisfaction will enhance persistence intentions such that the more satisfied the owner, the more likely the owner will be to persist with business ownership. • Support for the satisfaction/commitment relationship (p < .001) • Support for the satisfaction/willingness to sell or close re- lationship (p <.01) • No support for the satisfaction/effort relationship (p > .10) Hypothesis 3. Owner education will enhance persistence intentions such that the more educated the owner, the more likely the owner will be to persist with business ownership. • No support for any of the proposed relationships (p > .10) Hypothesis 4. Owner competencies will enhance persistence intentions such that the more compe- tencies the owner possesses, the more likely the owner will be to persist with business ownership. • No support for the competency/commitment relationship (p > .10) • No support for the competency/willingness to sell or close relationships (p > .10) • Support for the competency/effort relationship as oppor- tunity recognition ability was positively associated with effort (p < .001) Hypothesis 5. Owner personal investment will en- hance persistence intentions such that the higher the owner’s personal investment, the more likely the owner will be to persist with business ownership. • No support for the personal investment/commitment (p > .10) • No support for the personal investment/willingness to sell or close relationship (p > .10) • Marginal support for the personal investment/effort rela- tionship (p < .10) 109 G. Murphy, N. Tocher, T. Burch Journal of Small Business Strategy / Vol. 29, No. 1 (2019) / 99-114 cates that many owners make a discretionary decision to either continue operating or stop operating firms which are viable entities (e.g. Hsu et al., 2016). Our paper complements the exit literature by suggesting that the decision to persist, as well as the decision to exit, is often likely based on factors other than owner planning and operational proficiencies (e.g. Holland & Garrett, 2015; Nagy et al., 2017). As such, our find- ings suggest that research on the owner characteristics persistence intentions relationship should continue. While our study suggests that optimistic, alert, and sat- isfied owners may be more likely to persist with busi- ness operations, it also raises many interesting new research questions. For example, what additional per- sonal characteristics influence owner persistence? Do past experiences, functional background, personality, and particular orientations influence that decision too? Similarly, do persistent owners operate more profit- able firms than firms owned by less persistent own- ers? And, does the owner characteristics/persistence intentions remain consistent over time or is it more in- tense during startup, legitimacy attainment, or growth? Future research will help answer these questions and further enhance scholarly understanding of the owner characteristics/persistence intentions relationship. Next, study findings suggest that failure research must acknowledge the role of owner characteristics in the discretionary exit decision and clearly define the definition of business failure. Notably, failure research often classifies firms that are closed, sold, combined with other businesses, and restructured into different ownership forms as failed businesses (Wagner, 2013). Additionally, failure research implicitly counts volun- tarily discontinued firms as failed firms (Holland & Shepherd, 2013). These common practices lead to the press, business advisory agencies, politicians, and so- ciety citing exaggerated failure rates (Hsu et al., 2016). If such entities subscribe to a grossly exaggerated busi- ness failure rate percentage, it will in turn almost cer- tainly discourage individuals (particularly persistent individuals with viable market offerings) from starting businesses (Gibson, 2010), costing society the eco- nomic impact of viable firms which are never launched (Tocher, Oswald, & Hall, 2015). Given this, future research needs to properly define business failure as firms which are forced out of the market by economic forces and recalculate the business failure percentage based on that definition (Justo et al., 2015). Notably, media reports have cited the business fail- ure percentage as high as 90%, despite any substantial evidence to back up that claim (Kessler, 2014). Other more reputable studies find that over 60% of business- es fail within their first six years of operations (Small Business Facts, 2012). While we do not dispute that business failure rates are high, we simply assert that a more accurate failure percentage is needed and that re- search should acknowledge the possibility that owner characteristics likely influence the discretionary exit/ persist decision (Pett & Wolff, 2016; Rita et al., 2018). Identifying an accurate failure rate and acknowledging that owner characteristics influence that rate will help scholars (1) identify owners which will be more likely to exit viable firms and (2) reduce the likelihood that potential business owners with viable market offerings will be discouraged from starting firms. Third, our study implies that discretionary business exit could be decreased by simply getting optimistic, satisfied, and alert individuals to take on business own- ership and discouraging others from undertaking the daunting process. Given study findings that optimistic, satisfied, and alert individuals are more likely to con- tinue operating businesses, it follows that if such indi- viduals were encouraged to start businesses and others were discouraged, discretionary exit could potentially be decreased (Williams Jr. et al., 2018). We certainly acknowledge that market forces, business acumen, and access to critical resources determine which business owners will eventually be successful (Stam & Elfring, 2008). That said, research findings that experienced business owners are more likely to persist with busi- ness ownership (Schenkel, D’Souza, Cornwall, & Mat- thews, 2015) as well as findings suggesting that it takes businesses an average of 8 years to reach consistent profitability and 12 years to be fully legitimized (Ruth- erford et al., 2016) suggest that owner persistence is critically important to business survival and success. And, given our study findings that optimistic, satisfied, and alert owners are more persistent, it seems that en- couraging such individuals to undertake business own- ership in the first place would enhance persistence and in turn decrease discretionary exit. However, our study also begs the question of is it advisable to encourage persistent individuals to under- take business ownership? While an increased number of persistent owners may decrease discretionary exit, it is not clear if owner persistence influences firm prof- itability. Thus it is not clear if encouraging persistent individuals to undertake ownership will help the econ- omy. On one hand, it seems reasonable that persistent business owners would gain valuable experience, help- ing their firms achieve high performance levels. On the other hand, it is possible that owner persistence simply helps firms remain operational and has no ag- gregate influence on firm performance. Hence, future 110 G. Murphy, N. Tocher, T. Burch Journal of Small Business Strategy / Vol. 29, No. 1 (2019) / 99-114 research should examine the owner persistence/firm performance relationship. Similarly, our research leads one to wonder if business support entities such as the SBDC should attempt to rescue viable businesses by finding more persistent owners to operate them. Exit research sug- gests that many owners make discretionary decisions to stop operating profitable enterprises for a variety of reasons (e.g. Justo et al., 2015). Further, failure re- search suggests that getting a business through its first years of operations is highly critical to its survival (e.g. Wagner, 2013). Given this, perhaps business support agencies such as small business development centers should work to connect highly persistent individuals with existing businesses to operate instead of helping them start new ones. Regardless of the accuracy of the statistics, all research indicates that business startup is a highly risky proposition (Hsu et al., 2016), yet lo- cal, state, federal, and foreign governments pour tons of resources into helping individuals start new firms (Small Business Facts, 2012). Perhaps a much better use of some of those resources would be to identify op- timistic, satisfied, and alert individuals and link them up with businesses to operate that would otherwise be closed by other less persistent owners. While future research is needed to investigate the above quandary, it is at least worth considering if whether business sup- port entities should consider using some resources to match persistent individuals up with viable businesses to operate. Future Research The present study highlights many interesting ar- eas for research. First and foremost, our study’s find- ing that a positive association exists between person- al characteristics and owner persistence suggests that such research should continue. Both validation studies of our findings and examinations of the relationship between additional personal characteristics (i.e. func- tional background, past experience, personality) and persistence intentions are needed. Next, as discussed extensively above, research needs to be conducted to identify a more accurate busi- ness failure rate. Current research suggests that over 60% of businesses fail within 6 years (Small Business Facts, 2012), but such estimates categorize business formation transitions (i.e. proprietorship to an LLC) as a failed business and a new startup business instead of an existing business making a legal transition. Such studies also implicitly count discretionary owner exit decisions as failures instead of discretionary exits (Hsu et al., 2016), exaggerating the failure rates and potentially discouraging potential new venture found- ers (Tocher et al., 2015). Hence, it is critical to both scholars and the economy that research identify a more accurate business failure rate. Further, while the finding that owner characteris- tics are positively associated with persistence intentions discovered here is interesting and informative, future research is needed to determine if persistent owners operate profitable ventures. Opportunity recognition research suggesting that experienced entrepreneurs are more likely to persist with venture formation supports the notion that a persistent owner would gain valuable experience through his/her years of ownership per- sistence, increasing his/her firm’s performance levels (Schenkel et al., 2015), but again, future studies are needed to validate such a proposition. Finally, future research should consider examin- ing the owner characteristics persistence/intentions relationship with time series data. While this study examined and found evidence for a positive associa- tion between owner characteristics and persistence in- tentions, future studies that examined a continuous set of firms in varying industries over several years could answer some very intriguing questions. For instance, do owners’ persistence intentions remain constant or do they tend to vary throughout stages of firm owner- ship? Do owner characteristics have varying influence on persistence intentions in different industries? While we studied the owner characteristics/persistence inten- tions relationship in the manufacturing industry, it may be far easier to persist in industries like the service in- dustry and more difficult to persist in others such as the biomedical industry. Similarly, there may be a critical persistence threshold whereby if an owner persists for a certain number of years or a certain point in profit- ability their chances of persisting for many more years increases dramatically (Rutherford et al., 2016; Schen- kel et al., 2015). While the present study’s findings are interesting and informative, answering the above ques- tions in future studies would greatly clarify scholarly understanding of the owner characteristics/persistence intentions relationship. Limitations Like all studies, this one has limitations. A first study limitation is that owner persistence intentions was measured at a single point in time. As noted above, time series data would have helped determine a caus- al relationship between owner characteristics and per- 111 G. Murphy, N. Tocher, T. Burch Journal of Small Business Strategy / Vol. 29, No. 1 (2019) / 99-114 sistence intentions. Studying small firm owners in the manufacturing industry represents another limitation. Hence, we are not able to say if our findings can be generalized to a more broad population of firms. Giv- en that manufacturing is a difficult industry in which to survive, it follows that if the owner characteristics/ persistence intentions relationship exists in manufac- turing, it likely exists in many other industries such as service and retail that are far easier in which to main- tain operations. However, future studies of the owner characteristics/persistence intentions relationship in a multiple industry sample are desirable. Another limitation of the study is that persistence intentions were not directly measured in this study. Rather, three proxy measures of persistence intentions (commitment, willingness to sell or close, and effort) were used. While persistence may be able to be mea- sured more directly and other proxies of persistence may exist, we decided not to combine the three prox- ies of persistence intentions into a single measure because each captures a somewhat distinct aspect of persistence intentions. For example, while an owner may feel a great deal of commitment to a business, she may also realize that she may have to sell or close the business due to financial performance issues. Simi- larly, an owner may be very committed to continue business ownership, but through experience may have found ways to decrease his/her effort. Data collection using self-report survey responses from owners is also a study limitation. Objective metrics are preferable in any study. While it is a notable limitation, self-report data has been found to be reliable when gathered from firm owners (Nayyar, 1992; Tan & Litschert, 1994). Further, data collection on the two main study vari- ables of owner characteristics and owner persistence intentions are typically collected via self-report sur- veys, as few other methods exist to gather such infor- mation (e.g. DeTienne, 2010). That said, since single source data gathering intro- duces the chance of common method variance (CMV), we conducted Lindell and Whitney’s (2001) marker test to check that CMV did not influence study find- ings. This test requires identification of a marker vari- able that in theory should not be related to the variables of interest and then partialling out the correlation of the marker and the variables of interest. If the interest variables are still correlated after accounting for the marker variable, it can be concluded that CMV did not account for study results (Lindell & Whitney, 2001). We conducted this test by partialling out the influence of gender and then testing that owner characteristic and persistence intentions were still significantly correlat- ed. Gender was chosen because there does not appear to be any reason why it would be theoretically relat- ed to either the personal characteristics examined or an individual’s persistence intentions (e.g. Batchelor, 2015). Results indicated that the significant correla- tions between owner characteristics and persistence in- tentions (i.e. future expectations, opportunity recogni- tion ability, and satisfaction on persistence intentions) were still significantly correlated after partialling out gender. Hence, while self-report data remains a limita- tion, we did not find evidence that CMV effected study results (Lindell & Whitney, 2001). Despite these lim- itations, we assert that since our study is one of the first examinations of the owner characteristics persistence intentions relationship, its findings are noteworthy and thus future research should continue to examine the topic. Conclusion The main finding of the present study is that per- sonal characteristics are a key factor that influence owner persistence intentions. The positive associa- tion between owner characteristics discovered in this paper in conjunction with the complementary nature of such findings to the exit literature’s findings that myriad personal factors influence owners’ decisions to continue operating their firms provide significant evidence of such an assertion. Given this, it appears that researchers should continue examining the own- er characteristics/persistence intentions relationship. We certainly acknowledge that countless factors affect an owner’s decision to either exit or persist with firm ownership. 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