Objective Metrics for Predicting New Venture Survival

Abstract Venture evaluations determining the allocation of supporting resources in the innovation system are often based on decision-makers’ intuition. These evaluations in general fail to predict venture survival to a satisfactory extent. Thus, this paper contributes to the academic debate around the prediction of early-stage venture survival by providing evidence for the usefulness of objective measures. Its main contribution to entrepreneurship practice is a potential improvement of entrepreneurship support decision-making. We capture ventures’ dynamic capabilities by measuring transaction relations from business plans and compare the predictive power of this objective measure to a subjective, intuitive judgement on venture survival for the respective business plans and start-ups. Analyses based on a sample of 272 early-stage new technology-based firms suggest that the objective measure does not only outperform the best prediction based on the sample mean but also reaches a significantly higher survival prediction accuracy than the subjective, intuition-based evaluations. It is argued that there is potential for further improving the predictive power reached with objective measures.