How prior investments of time, money, and employee hires influence time to exit a distressed venture, and the extent to which contingency planning helps

Unfortunately, for many entrepreneurs there comes a time when they must exit their firms due to economic distress. While some exit quickly once they perceive the need to do so, others delay, and there are benefits and costs to both approaches. Using an escalation of commitment framework, we explore variation in exit speed, and find that time to exit after the firm experiences distress depends on the types and extent of investments made prior to that distress. Further, our data indicate that contingency planning moderates the relationships between certain types of investments and time to exit.