A categorization of the consequences of entrepreneurial failure
Validated in Hungary
DOI:
https://doi.org/10.14267/VEZTUD.2023.05.01Keywords:
entrepreneurial failure, consequence, cost of failureAbstract
Uncertainty and risk are basic elements of entrepreneurial life, and consequently, most entrepreneurs will experience failure, which can impact their lives in various ways. Although several previous studies have tried to categorize the consequences of failure, none could cover their full range. Therefore, the main objective of this qualitative, narrative research was to build a useable categorization system for the consequences of entrepreneurial failure. As a result of this theoretical- and sixteen-interview-based research, the consequences of entrepreneurial failure can be categorized into six groups (and twenty-four sub-groups): financial, psychological, social, professional, legal and physiological consequences. Based on the results, failure is not a negative experience for all entrepreneurs; in fact, for many, negative and positive consequences balanced each other out, or they were not impacted by the failure. During the analysis, potential connections between categories of consequences and the identification of root consequences are also presented.
Downloads
References
Artinger, S., & Powell, T. C. (2016). Entrepreneurial failure: Statistical and psychological explanations. Strategic Management Journal, 37(6), 1047-1064. https://doi.org/10.1002/smj.2378
Atsan, N. (2016). Failure experiences of entrepreneurs: causes and learning outcomes. Procedia-Social and Behavioral Sciences, 235, 435-442. https://doi.org/10.1016/j.sbspro.2016.11.054
Byrne, O., & Shepherd, D. A. (2015). Different strokes for different folks: Entrepreneurial narratives of emotion, cognition, and making sense of business failure. Entrepreneurship Theory and Practice, 39(2), 375-405. https://doi.org/10.1111/etap.12046
Cardon, M. S., Stevens, C. E., & Potter, D. R. (2011). Misfortunes or mistakes?: Cultural sensemaking of entrepreneurial failure. Journal of Business Venturing, 26(1), 79-92. https://doi.org/10.1016/j.jbusvent.2009.06.004
Cope, J. (2011). Entrepreneurial learning from failure: An interpretative phenomenological analysis. Journal of Business Venturing, 26(6), 604-623. https://doi.org/10.1016/j.jbusvent.2010.06.002
Corbin, J., & Strauss, A. (2008). Basics of qualitative research: techniques and procedures for developing grounded theory. Thousand Oaks, CA: Sage Publications. Corner, P. D., Singh, S., & Pavlovich, K. (2017). Entrepreneurial resilience and venture failure. International Small Business Journal, 35(6), 687-708. https://doi.org/10.1177/0266242616685604
Cotterill, K. (2012). A comparative study of entrepreneurs’ attitudes to failure in technology ventures. International Journal of Innovation Science, 4(2), 101-116. https://doi.org/10.1260/1757-2223.4.2.101
Csákné Filep J., Gosztonyi M., Radácsi L., Szennay Á., & Timár G. (2022). Vállalkozói környezet és attitűdök Magyarországon – Global Entrepreneurship Monitor – Nemzeti jelentés – Magyarország 2021-2022 (Entrepreneurial environment and attitudes in Hungary – Global Entrepreneurship Monitor – National report - Hungary 2021-2022). Budapest: BGE. https://doi.org/10.29180/978-615-6342-24-9
Dvouletý, O., & Orel, M. (2020). Determinants of solo and employer entrepreneurship in Visegrád countries: findings from the Czech Republic, Hungary, Poland and Slovakia. Journal of Enterprising Communities: People and Places in the Global Economy, 14(3), 447-464. https://doi.org/10.1108/JEC-04-2020-0052
European Commission. (2012). Entrepreneurship in the EU and beyond (Flash Eurobarometer 354). http://ec.europa.eu/public_opinion/flash/fl_354_en.pdf
Falkné Bánó K. (2015). Miért olyan ellentmondásosak a magyar kulturális sajátosságok felméréseinek eredményei különböző kutatásokban? (Why are the results of identifying Hungarian cultural characteristics so controversial in different researches?) Alkalmazott Nyelvészeti Közlemények; Interdiszciplináris Tanulmányok, 10(1), 76–88. https://matarka.hu/koz/ISSN_1788-9979/vol_10_no_1_2015/ISSN_1788-9979_vol_10_no_1_2015_076-088.pdf
Fang He, V. & Krähenmann, G. (2021). (Not) Learning from failure? The heavy toll of stigma on entrepreneurs. In Todt, G., Backmann, J. & Weiss, M. (Eds.), Work Life After Failure?: How Employees Bounce Back, Learn, and Recover from Work-Related Setbacks (pp. 143-171). Bingley, UK: Emerald Publishing Limited. https://doi.org/10.1108/978-1-83867-519-620211018
GEM. (2017). https://www.gemconsortium.org/data
Hofstede, G. (2015). Dimension data matrix. https://geerthofstede.com/research-and-vsm/dimension-data-matrix/
Hungarian Central Statistical Office. (2022). 1.2.4. Vállalkozások demográfiája és struktúrája (2006–2018) (Demography and structure of enterprises). Budapest. https://www.ksh.hu/thm/1/indi1_2_4.html
Hsu, D. K., Wiklund, J., & Cotton, R. D. (2017). Success, failure, and entrepreneurial reentry: An experimental assessment of the veracity of self–efficacy and prospect theory. Entrepreneurship Theory and Practice, 41(1), 19-47. https://doi.org/10.1111/etap.12166
Hwang, K., & Choi, J. (2021). How do failed entrepreneurs cope with their prior failure when they seek subsequent re-entry into serial entrepreneurship? Failed entrepreneurs’ optimism and defensive pessimism and coping humor as a moderator. International Journal of Environmental Research and Public Health, 18(13), 7021. https://doi.org/10.3390/ijerph18137021
Jenkins, A., & Wiklund, J. (2012). A risky decision or an informed choice: Re-entry after firm failure. In Frontiers of entrepreneurship research 2012 proceedings of the thirty-second annual Entrepreneurship Research Conference (pp. 305-316). Arthur M. Blank Center for Entrepreneurship, Babson Park, Mass.
Jenkins, A. S., Wiklund, J., & Brundin, E. (2014). Individual responses to firm failure: Appraisals, grief, and the influence of prior failure experience. Journal of Business Venturing, 29(1), 17-33. o. https://doi.org/10.1016/j.jbusvent.2012.10.006
Khelil, N. (2016). The many faces of entrepreneurial failure: Insights from an empirical taxonomy. Journal of Business Venturing, 31(1), 72-94. https://doi.org/10.1016/j.jbusvent.2015.08.001
Klimas, P., Czakon, W., Kraus, S., Kailer, N., & Maalaoui, A. (2021). Entrepreneurial failure: a synthesis and conceptual framework of its effects. European Management Review, 18(1), 167-182. https://doi.org/10.1111/emre.12426
McGrath, R. (1999). Falling forward: Real options reasoning and entrepreneurial failure. Academy of Management Review, 24, 13-30. https://doi.org/10.5465/amr.1999.1580438
Patel, P. C., Wolfe, M. T., & Williams, T. A. (2019). Self-employment and allostatic load. Journal of Business Venturing, 34(4), 731-751. https://doi.org/10.1016/j.jbusvent.2018.05.004
Pearlman, J. (2015). The consequences of job displacement for health: Moderating influences of economic conditions and educational attainment. Social Science Research, 52, 570-587. http://dx.doi.org/10.1016/j.ssresearch.2015.04.006
Prusak, B., Morawska, S., Łukowski, M., & Banasik, P. (2022). The impact of bankruptcy regimes on entrepreneurship and innovation. Is there any relationship? International Entrepreneurship and Management Journal, 18(1), 473-498. https://doi.org/10.1007/s11365-021-00773-3
Repisky M. (2018). Vállalkozói kudarc – A vég, vagy egy új kezdet? (Entrepreneurial failure – The end or a new beginning?). Vezetéstudomány, 49(4), 12-22. https://doi.org/10.14267/veztud.2018.04.02
Riar, F. J., Bican, P. M., & Fischer, J. (2021). It wasn’t me: Entrepreneurial failure attribution and learning from failure. International Journal of Entrepreneurial Venturing, 13(2), 113-136. https://doi.org/10.1504/ijev.2021.114385
Rieger, V., Wilken, J., & Engelen, A. (2022). Career booster or dead end? entrepreneurial failure and its consequences for subsequent corporate careers. Journal of Management Studies. https://doi.org/10.1111/joms.12866
Shepherd, D.A. (2003). Learning from business failure: propositions of grief recovery for the self-employed. Academy of Management Review, 28(2), 318–328. https://doi.org/10.5465/amr.2003.9416377
Shepherd, D. A., & Cardon, M. S. (2009). Negative emotional reactions to project failure and the self‐compassion to learn from the experience. Journal of Management Studies, 46(6), 923-949. https://doi.org/10.1111/j.1467-6486.2009.00821.x
Shepherd, D. A., & Haynie, J. M. (2011). Venture failure, stigma, and impression management: A self‐verification, self‐determination view. Strategic Entrepreneurship Journal, 5(2), 178-197. https://doi.org/10.1002/sej.113
Shepherd, D. A., & Patzelt, H. (2017). Trailblazing in entrepreneurship: Creating new paths for understanding the field. New York: Springer.
Shepherd, D. A., Wiklund, J., & Haynie, J. M. (2009). Moving forward: Balancing the financial and emotional costs of business failure. Journal of Business Venturing, 24(2), 134-148. https://doi.org/10.1016/j.jbusvent.2007.10.002
Silver, L. S. (2015). A social-cognitive model of entrepreneurship failure: beyond attributional style. Archives of Business Research, 3(4), 55-62. https://doi.org/10.14738/abr.34.1306
Simmons, S., Wiklund, J., & Levie, J. (2014). Stigma and business failure: implications for entrepreneurs’ career choices. Small Business Economics, 42(3), 485-505. https://doi.org/10.1007/s11187-013-9519-3
Singh, S., Corner, P., & Pavlovich, K. (2007). Coping with entrepreneurial failure. Journal of Management & Organization, 13, 331-344. https://doi.org/10.1017/s1833367200003588
Singh, S., Corner, P. D., & Pavlovich, K. (2015). Failed, not finished: A narrative approach to understanding venture failure stigmatization. Journal of Business Venturing, 30(1), 150-166. https://doi.org/10.1016/j.jbusvent.2014.07.005
Szerb L., & Kocsis-Kisantal O. (2008). Vállalkozói kultúra Magyarországon két napilap tükrében (Corporate culture in Hungary seen through two daily newspapers). Közgazdasági Szemle, 55(3), 243–261. http://www.epa.hu/00000/00017/00146/pdf/04mhszerb-kocsis-kisantal.pdf
Tóth, I. Gy. (2010). A társadalmi kohézió elemei: bizalom, normakövetés, igazságosság és felelősségérzet – lennének (The elements of social cohesion would be: trust, norm following norm, justice and sense of responsibility). In Kolosi, T. & Tóth, I. Gy. (Eds.), Társadalmi Riport (pp. 254-287). Budapest: TÁRKI.
Ucbasaran, D., Shepherd, D., Lockett, A., & Lyon, S. J. (2013). Life after business failure: the process and consequences of business failure for entrepreneurs. Journal of Management, 39(1), 163–202. https://doi.org/10.1177/0149206312457823
Ucbasaran, D., Westhead, P., Wright, M., & Flores, M. (2010). The nature of entrepreneurial experience, business failure and comparative optimism. Journal of Business Venturing, 25(6), 541-555. https://doi.org/10.1016/j.jbusvent.2009.04.001
Varga, K. (2008). Hofstede és a magyar szociológia. In Hofstede, G. & Hofstede, G. J. (Eds.), Kultúrák és szervezetek. Az elme szoftvere (Cultures and organisations. Software of the mind). Pécs: VHE Kft.
Virágh, E. A., & Szepesi, B. (2022). Vállalkozók reprezentációja a főáramú online médiában Magyarországon (Representation of entrepreneurs in the mainstream online media in Hungary). Szociológiai Szemle, 32(3), 24-56. https://doi.org/10.51624/SzocSzemle.2022.3.2
Wakkee, I., Dorrestein, F., & Englis, P. (2014). The stigmatization of bankrupt entrepreneurs in Dutch newspapers. Journal of Small Business & Entrepreneurship, 27(4), 369-391. https://doi.org/10.1080/08276331.2015.1017869
Welter, F., & Smallbone, D. (2011). Institutional perspectives on entrepreneurial behavior in challenging environments. Journal of Small Business Management, 49(1), 107-125. https://doi.org/10.1111/j.1540-627X.2010.00317.x
Wennberg, K., & DeTienne, D. R. (2014). What do we really mean when we talk about ‘exit’? A critical review of research on entrepreneurial exit. International Small Business Journal, 32(1), 4-16. https://doi.org/10.1177/0266242613517126
Wennberg, K., Wiklund, J., DeTienne, D. R., & Cardon, M. S. (2010). Reconceptualizing entrepreneurial exit: Divergent exit routes and their drivers. Journal of Business Venturing, 25(4), 361-375. https://doi.org/10.1016/j.jbusvent.2009.01.001
Wiesenfeld, B.M., Wurthmann, K.A., & Hambrick, D.C. (2008). The stigmatization and devaluation of elites associated with corporate failures: a process model. Academy of Management Review, 33(1), 231-251. https://doi.org/10.5465/amr.2008.27752771
Williamson, A. J., Drencheva, A., & Battisti, M. (2022). Entrepreneurial disappointment: Let down and breaking down, a machine-learning study. Entrepreneurship Theory and Practice, 46(6), 1500- 1533. https://doi.org/10.1177/1042258720964447
Yamakawa, Y., & Cardon, M. S. (2015). Causal ascriptions and perceived learning from entrepreneurial failure. Small Business Economics, 44(4), 797-820. https://doi.org/10.1007/s11187-014-9623-z
Yamakawa, Y., Peng, M. W., & Deeds, D. L. (2015). Rising from the ashes: Cognitive determinants of venture growth after entrepreneurial failure. Entrepreneurship Theory and Practice, 39(2), 209-236. https://doi.org/10.1111/etap.12047
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2023 Vezetéstudomány / Budapest Management Review
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors assign copyright to Vezetéstudomány / Budapest Management Review. Authors are responsible for permission to reproduce copyright material from other sources.
