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Why do startups fail? A core competency deficit model.

Edit Szathmári1,2, Zoltán Varga3, Attila Molnár4

  • 1Doctoral School of Psychology, ELTE Eötvös Loránd University, Budapest, Hungary.

Frontiers in Psychology
|February 23, 2024
PubMed
Summary
This summary is machine-generated.

Startup team competency deficits, particularly in information-seeking and customer service, significantly drive business failures. Addressing these gaps can help prevent startup demise.

Keywords:
competency deficitscore competenciescustomer service orientationinformation-seekingstartup failures

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Area of Science:

  • Business Management
  • Organizational Psychology

Background:

  • Startup failure is a significant concern, yet research on its causes remains fragmented.
  • Existing studies often lack a cohesive theoretical framework to explain failure reasons.
  • Competency deficits within startup teams are a critical, yet under-researched, factor in failure.

Purpose of the Study:

  • To systematically investigate the role of competency deficits in startup failures.
  • To adapt Spencer's behavioral competence model for the startup context.
  • To identify specific team competencies contributing to startup downfall from CEOs' perspectives.

Main Methods:

  • Adapted Spencer's behavioral competence model for startup analysis.
  • Analyzed 50 online accounts of startup failures using a modified Critical Incident Technique.
  • Employed three coders for meticulous analysis of qualitative data.

Main Results:

  • Identified information-seeking and customer service orientation deficits as primary determinants of startup failure.
  • Found deficits in technical expertise, analytical thinking, and flexibility to be significant contributing factors.
  • Highlighted specific competency gaps that led to negative startup outcomes.

Conclusions:

  • Competency deficits are pivotal in startup failure.
  • Targeted evaluation and enhancement of startup team competencies can mitigate failure risks.
  • Findings provide actionable insights for improving startup team effectiveness and survival rates.