Tolerance for Failure

The creation of new ventures, especially when these involve technological innovations, is widely considered to unleash a wealth of positive effects on the economy, such as higher employment, increased productivity, and enhanced development. By their very nature, new ventures are uncertain. No entrepreneur knows a priori which, out of many possible outcomes, he or she will obtain and with which probability. However, by definition, some of these outcomes involve firm closure or, as it is sometimes called, firm failure.

Firm failure has historically been a cause for concern, with a rate of closure slightly higher than 60 percent six years following creation. However, both the data of U.S. Census Bureau's Business Information Tracking Series (BITS) and the U.S. Census Bureau's Characteristics of Business Owners (CBO) show ...