Attributions, Learning and Stigmatization

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Implication of Failure

The implications of entrepreneurial failure are, as seen from the literature, threefold. Firstly, business failures have certain effects on the industry in which they operate. Knott and Posen (2005) argue that business failure lowers industry cost and generates spill-overs of knowledge which are consequently used by the surviving firms. Secondly, business failure has negative implications for the entrepreneur since it is associated with grief and lower self-esteem (Jenkins, Wiklund & Brundin, 2014), feelings of depression and worthlessness (Baù, Sieger, Eddleston & Chirico, 2018) and other emotional, financial and social costs (Ucbasaran et al., 2013). In addition, research shows that business failure causes the entrepreneur to become socially stigmatized with the consequence of lower legitimacy of the entrepreneur in the eyes of the public (Kibler, Mandl, Kautonen & Berger, 2017).

Costs of Failure for Entrepreneur

Given that there seems to be a consensus regarding the idea that failure leads to entrepreneurial learning (Walsh & Cunningham, 2017; Yamakawa & Cardon, 2015; Ucbasaran et al., 2013), research also suggests that failure has certain drawbacks as well. Ucbasaran et al. (2013) found that entrepreneurial failure leads to financial, psychological and social costs. Financial cost of failure is the most obvious one, and although some entrepreneurs suffer a lower financial loss, others end up losing significant personal investments which in turn affects their personal economy negatively (Cope, 2011). Another important cost is the emotional cost (Cope, 2011) which can include feelings of grief, depression and guilt among others (Ucbasaran et al., 2013). Moreover, feelings of grief are recognized by several scholars in the entrepreneurial literature and are also a barrier when engaging in learning (Cope, 2011).

Different Types of Entrepreneurs

In the entrepreneurship literature, there are different types of entrepreneurs described. Novice entrepreneurs are people who currently own a business, but do not have any experience in the majority or minority ownership of a previous venture (Westhead, Ucbasaran & Wright, 2005). Habitual entrepreneurs on the other hand are “repeat entrepreneurs” i.e. entrepreneurs who have, in one way or another, at least one previous experience in the ownership of a firm (Westhead et al., 2009). More specifically, habitual entrepreneurs can be further divided into serial entrepreneurs and portfolio entrepreneurs. Portfolio entrepreneurs have an ownership stake in two or more ventures at once, in contrast to serial entrepreneurs who have shut down or sold a previous business and have an ownership stake in another current venture (Westhead et al., 2005).

Attributions, Learning and Stigmatization

Entrepreneurs who attribute their failure internally, that is, as caused by factors under the entrepreneurs’ control like inexperience or lack of skills, are found to learn more and gain deeper insights about their failure (Yamakawa & Cardon, 2015; Yamakawa, Peng & Deeds, 2017). One reason for this learning is that an internal attribution allows the entrepreneur to engage in deep thinking and reflection, which are important for learning (Yamakawa & Cardon, 2015). In addition, Yamakawa et al. (2017) argue that an internal attribution of failure causes the entrepreneur to retrospectively view the failure and thereby evaluate, in terms of themselves as individuals what they could have done differently.

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Learning and Opportunity Identification

Alertness and learning from failure can also benefit the entrepreneur by enabling him/her to recognize opportunities in the market (Hajizadeh & Zali, 2016; Boso et al., 2018; Minello, Scherer & Da Costa Alves, 2014) and exploit those opportunities (Atsan, 2016). Mueller and Shepherd (2016) argue that the identification of opportunities is performed using structural alignment, which means that the entrepreneurs cognitively compare how a product works, and then recognize the use and the benefit of that product in the market (Grégoire, Barr & Shepherd, 2010). In addition to this, learning also increases the entrepreneurs´ chances of starting a new business (Dias and Teixeira, 2017) which is close to the findings of Acheampong and Tweneboah-Koduah (2018), who argue that failure positively impacts entrepreneurs´ intentions to re-venture.

Table of Contents :

  • 1. Introduction
    • 1.1 Background
    • 1.2 Problem
    • 1.3 Purpose
    • 1.4 Delimitation
  • 2. Frame of Reference
    • 2.1 Literature Searching Method
    • 2.2 Business Failure
      • 2.2.1 Business Failure vs. Business Exit
      • 2.2.2 Definition of Entrepreneurial Failure
      • 2.2.3 Implication of Failure
      • 2.2.4 Costs of Failure for Entrepreneur
    • 2.3 Different Types of Entrepreneurs
    • 2.4 Attributions, Learning and Stigmatization
    • 2.5 Learning
      • 2.5.1 Learning and Opportunity Identification
      • 2.5.2 Learning and Attitude
      • 2.5.3 Opposing Views on Learning
    • 2.6 Human Capital
      • 2.6.1 Knowledge and Skills
      • 2.6.2 General and Specific Human Capital
      • 2.6.3 Learning and Human Capital
  • 3. Methodology and Method
    • 3.1 Methodology
      • 3.1.1 Research Philosophy
      • 3.1.2 Research Approach
    • 3.2 Research Design
      • 3.2.1 Research Strategy
      • 3.2.2 Research Method
      • 3.2.3 Case Selection Criteria
    • 3.3 Data Collection Techniques
      • 3.3.1 Primary Data
      • 3.3.2 Secondary Data
    • 3.4 Data Analysis
    • 3.5 Research Quality
      • 3.5.1 Reliability
      • 3.5.2 Validity
      • 3.5.3 Generalizability
      • 3.5.4 Ethical Considerations
  • 4. Empirical Findings
    • 4.1 Business Failure vs. Business Exit
    • 4.2 Definition of Entrepreneur Failure
    • 4.3 Different Types of Entrepreneurs
    • 4.4 Costs of Failure for Entrepreneur
    • 4.5 Attributions and Transfer of Knowledge
    • 4.6 Stigmatization
    • 4.7 Learning and Opportunity Identification
    • 4.8 Learning and Attitude
    • 4.9 Human Capital
      • 4.9.1 Skills
      • 4.9.2 Knowledge
      • 4.9.3 General and Specific
      • 4.10 Learning and Human Capital
  • 5. Analysis
    • 5.1 Defining Business Failure
    • 5.2 Costs of Failure
    • 5.3 Learning
      • 5.3.1 Attributions and Transfer of Knowledge
      • 5.3.2 Stigmatization
      • 5.3.3 Opportunity Identification
    • 5.4 Human Capital
      • 5.4.1 Knowledge and Skills
      • 5.4.2 General and Specific Human Capital
    • 5.5 Human Capital as an Outcome of Learning
    • 5.6 Learning as an Outcome of Human Capital
  • 6. Conclusion
  • 7. Discussion
    • 7.1 Theoretical Implications
    • 7.2 Practical Implications
    • 7.3 Suggestions for Further Research
  • 8. Reference list

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The Effect of Entrepreneurial Failure and Human Capital on Learning.

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