Decentralized Autonomous Organizations (DAOs) as New Entrepreneurial Firms: Governance, Incentives, and Failure Rates

Decentralized Autonomous Organizations (DAOs) represent a novel organizational form enabled by blockchain technology, characterized by decentralized governance, token-based incentives, and automated execution via smart contracts. This paper conceptualizes DAOs as entrepreneurial firms, examining their governance structures, incentive mechanisms, and failure dynamics. Drawing on emerging empirical studies and organizational theory, the paper argues that while DAOs reduce traditional agency costs and enhance transparency, they introduce new coordination challenges, participation inefficiencies, and systemic vulnerabilities.

The analysis reveals that governance concentration, misaligned incentives, and low participation rates contribute significantly to DAO failure rates. The paper proposes a hybrid governance framework integrating decentralized mechanisms with adaptive institutional controls to improve DAO sustainability. This study contributes to entrepreneurship literature by positioning DAOs as a new frontier in digital firm formation and entrepreneurial finance.