There are business organizations who die young: yet their names and their programs are interesting as evidence of historicals trajectories. There are other business organizations that have been very durable, as Fomento Catalan or Development and chambers of commerce; we must also consider whether its implementation is due to vertical orders from top to bottom, or are spontaneous and horizontals.

Hello Vincente

I appreciate your response.

Thank you

It is based on accounting concept. It is assumed that the business will continue for a fairly long time to come. It is also important to note that it does not imply permanent continuance of the enterprise. It is rather presumes that the enterprise will continue in operation long enough.  Like in our day to day life when a new member comes in to our life or joins our family we expect he/she will live with us for a longer period. However, certain exceptions are also there he/she may not live or stay with us if uncertain event occurs.

Sir

Thank you for your response, but the question is precisely that. Does that assumption help in anyway? It is also contrary to the evidence about longevity of companies/ business organizations.

 Founders of a business may not want to grow the organization beyond a point as they grapple with issues of wealth and control (Ref: “The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup,” by Noam Wasserman, Princeton University Press). They behave like any going concern, and there is no way of knowing the founder's intentions.

Companies that have a great track record, as we saw in "Good to Great: Why Some Companies Make the Leap... and Others Don't" (by Jim C. Collins), which were very much going concerns at the time of writing the book, did not all perform well .

Thus companies may perish whether the founders intended to or not, and whether their customers and shareholders saw it coming or not. Till they actually do, we see these companies living like any other going concern. A researcher must treat the organization as per the behavior of the business. If it behaves like a startup, we may compare the business to a start up. If it behaves like an ageing firm, then yes, we must compare it to other firms in decline.

In the case of IIMs, older IIMs do not face the same competition and threats from younger IIMs as older business do from younger ones. So the stance is different. Also, as all the IIMs are in the same business, the older ones may mentor in terms of faculty, course ware, processes and practices. This commonality may not hold for business organizations.

Any business is created to add value ( wealth to owners /stakeholders) or a public service ( eg hospital/Municipality) so the assumed need would be present for the long term future. However as some contributors already mentioned, there are market forces and risks and also deliberate decisions by the shareholders to discontinue a business for a particular reason. For accounting purposes, unless it is clear to the auditors that the business is struggling, it is normally considered that it is a going concern and teh accounting is done on that basis.

Surely the concept of older IIMs mentoring new ones can be extended to business as well. In fact, it is happening all the time with spin outs and JVs. Even in case of new start up, matured business leaders help them as mentor either in independent setting or incubation setting.

If you think of a firm as a way of coordinating transactions internally (e.g. Oliver Williamson's ideas) then a firm should disband when the transactions are done more efficiently in a network or market.  But if you think that a firm is a social institution (Selznick, Zald, many other economic sociologists) that has social meaning and value to members then it should fight to sustain itself.  Think family businesses.  More at http://systemsofexchange.org)

Http://systemsofexchange.org

Business organizations are not started to die young, as the very existence comes into being with vision, mission and objectives which are required to be fulfilled to achieve success. Hence the concept of 'ongoing  concerns '. The life cycle of an organization is very similar to that of human life cycle which follows the path of birth, infancy, juvenile youth, maturity and old age. Organizational life cycle starts with entrepreneurial idea and follows the path of introduction, growth, maturity and decline.  Organization as a new entity is influenced by business environment and its survival depends on the entrepreneurial idea and its capacity to face the competition and to define product or services to offer in an identified market segment. Maturity phase is very important for the ultimate survival, growth and development of an organization, very similar to that of human being. Corporate strategy must be worked out to remain competitive in a changing business environment. As the organization grows old, strategic deployment of organizational resources are essential for survival, stability and growth through creation of competitive advantage in the area of organizational core competence.

Yes, the concept is that Business organizations/ companies are  ongoing concerns but this age old concept needs to change with the present VUCA world where your past success is no more guarantee for your future existence..

Somehow I feel that if there is no theoretical or practical implication of "ongoing concern" as a concept, it should be done away with.

Hi Brajballav,

What exactly are you researching on?

Sir.. My area of research is around entrepreneurship and I believe one of the factors young entrepreneurs are biased against is about longevity of their organization.

"Ongoing" means "continuous". In business we consider that (business) environment is  dynamic and therefore 'continuously' changing, hence addressing change in business environment becomes an 'ongoing' concern for managers.  An organization's survival (longevity) depends on how effectively managers address the 'ongoing' concerns. That's the reason in business we cannot do away with the concept of 'ongoing concern'.

Entrepreneurship is a fascinating area with numerous dimensions. While entrepreneurship is a lasting concept, the start up is not. Any start uo has three future course:

1. It will grow on its own

2. It will be taken over or

3. It will close down

Only in the first case, it can be going concern and the other two it looses its existence.

By the way, which aspect of entrepreneurship are you researching on? I have couple of Ph.D students researching in the are of Entrepreneurship, which is an ocean. One has to narrow down the area within Entrepreneurship.