Exploring the phenomenon of new venture failure from a business network perspective

The present paper aims to contribute to IMP research on new business formation and development by focusing on the phenomenon of new venture failure in business networks. As a matter of fact the majority of developing new ventures is likely to fail within the first five years of their operations (Snehota, 2011). However, data reveal that many new ventures often rise from the ashes of failed one. This means that failed new ventures do not simply disappear into a vacuum, rather their released resources come to be often recycled and successfully reassembled into new initiatives and ventures. Despite this evidence, IMP scholars have paid little attention to how and why new ventures fail and what remains after failure. Instead, IMP research has been mostly focused on understanding how new ventures form and develop, namely how they develop their initial business relationships in order to assemble from others the necessary resources to grow (Aaboen et al., 2017). However, initiating new relationships, and turning new relationships into long-term business relationships, is particularly arduous and costly for new ventures as they often suffer from liabilities of newness and smallness which limit their ability to initiate, develop, and maintain relationships with others. For these reasons, the initial relationships of a new venture seem to be particularly problematic as, according to research, they are more likely to decay and terminate rather than develop and stabilise. The present paper aims to contribute to grasp the process through which a developing new venture comes to fail and what remains after failure. Following the IMP business network approach the research explores how and why initial business relationships decay and terminate, and what remains of resources and activities in the aftermath of relationship dissolution. To this aim, the research reports on a single explorative case study concerning the developing and failing of a promising startup venture born, raised, and failed across a period of four years. The ARA model for network analysis (Hakansson et al., 2009) is applied to capture the failing process of the new venture. Particular focus is put on the resource layer of relationships to better explain failure through the lens of resource interaction processes.