ENTREPRENEURIAL SELF-EFFICACY AND THE SUCCESS OF SUBSEQUENT VENTURE STARTUP AFTER FAILURE

Abstract

Everyone experiences failure at some point in their lifetime. Entrepreneurs, especially, have a high incidence of failure, with estimates that over sixty percent fail within six years. Yet, a high percentage of failed entrepreneurs recover and persevere to start another business. Sometimes, they even become "serial entrepreneurs" who start many businesses. How do entrepreneurs recover from failure and have success? This research focuses on the failed entrepreneur, and I investigate aspects of how and why some failed entrepreneurs recover and start a new business. My research focuses on characteristics of the failed entrepreneurs themselves, and how certain attributes might differentiate between failed entrepreneurs who recover successfully versus those who do not. Based upon fundamental theories of human behavior and recent inquiries that have influenced the entrepreneurship literature, I draw upon research about entrepreneurs' personal competencies that stand out as predictors of venture persistence and success, specifically, (1) domain-specific self-efficacy (2) emotion regulation, (3) practical intelligence, and (4) self-leadership, to propose a path to recovery when failure occurs. I suggest that these areas of research may enhance our knowledge of how and why failed entrepreneurs recover from failure. In addition, I investigate how characteristics of the immediate context or environment support or discourage subsequent startup. I interview and survey failed entrepreneurs, beginning with a list of firms from a Bay Area business consulting firm that helps failed companies "work out" of their business. Other contact sources include small business development centers, personal contacts, university entrepreneurship centers, and two populations of healthcare workers in the southern United States. Results of this study include entrepreneurial self-efficacy fully mediating the effects of both practical intelligence and emotion regulation on subsequent venture success, as well as partial mediation of support from social contacts on success. Theoretical and practical implications are discussed. Although research has been conducted on future success of successful entrepreneurs, as far as I can determine, no other academic researcher has attempted to understand and empirically demonstrate the future success of failed entrepreneurs.