This paper provides a systematic assessment of how entrepreneurs react to firmfailure. We use appraisal theory as an overarching theoretical framework andhypothesize that the more the failure experience is appraised as stressful interms of its implications for harm or loss, the greater the feelings of grief. Totest this hypothesis we developed a unique database of entrepreneurs whorecently filed for firm bankruptcy. Our results support that there is greatvariation in responses to firm failure, and we provide theoretically validexplanations to why this is the case. These findings have substantialimplications for how scholars conceive and theorize about entrepreneurialfailure.

Uncertainty is inherent to the entrepreneurship process. As such, the outcomes of entrepreneurial endeavors are unknown and unknowable a priori– some will be successful and others will fail. Entrepreneurship research, however, often focuses on new ventures and the entrepreneurs who own and run them in the start-up and growth phases. As a consequence, little is known about the failure experiences of entrepreneurs.

In this dissertation I investigate how entrepreneurs interpret and respond to the failure of their firms. I focus on learning, re-entry into self-employment, and emotional recovery as important adaptive outcomes. To do this, I draw on cognitive-emotional theories of adaptation and motivation to capture the interplay between the interpretations of the failure, emotions, financial loss, coping behaviors, and adaptive outcomes. I employ a longitudinal quantitative design and survey owner-managers of firms that had recently gone bankrupt.

The results are presented in four empirical papers that each focus on a specific aspect of the failure experience. The findings highlight that there is substantial variance in how entrepreneurs interpret firm failure and this has important implications for how they respond. Specifically, I show that loss of self-esteem is one mechanism which transfers failure of the firm to a personal failure for the entrepreneur and this help can explain why firm failure is emotionally devastating from some entrepreneurs and not others. I also found that coping can play a mediating role between the emotional and financial costs of failure and adaptive outcomes, providing empirical support for studying firm failure as part of an on-going entrepreneurial process rather than a single isolated event.

Focusing on learning as an outcome from failure, I found that attributions for the failure influence what an entrepreneur learns from failure and through their influence on learning, motivation to re-enter self-employment. Hence, I tease out the relationship between learning from firm failure and motivation to apply what has been learned. Lastly, I consider how failure provides feedback information to entrepreneurs regarding their return to human capital in self-employment and that entrepreneurs factor this information into their decision making when deciding whether or not they re-enter self-employment.

Taken together the dissertation provides a comprehensive picture of the implications of firm failure for entrepreneurs. The dissertation contributes to understanding why failure can be devastating for some entrepreneurs and not others and why some entrepreneurs learn from failure experiences and apply their new knowledge while others do not.

Using coping theory as an overarching theoretical framework, this paper investigates the effects of emotional and financial loss on re-entry into self-employment after firm failure and subsequent feelings of grief. I hypothesize that how firm failure is experienced influences the choice of coping strategies. In turn, the choice of coping strategies influences re-entry and feelings of grief. To test these hypotheses I developed a unique, longitudinal database of entrepreneurs who recently filed for firm bankruptcy. The findings largely support the hypothesized relationships. This paper shows that how entrepreneurs manage and cope with firm failure has implications for how they feel and whether they re-enter self-employment. Future research could investigate the relationship between entrepreneurial motivation and the use of adaptive coping strategies.

This paper provides a first systematic assessment of how entrepreneurs react to firm failure. As hypothesized, we find that these reactions are complex and multifaceted, involving grief as well as relief. We use appraisal theory as an overarching theoretical framework. To test the hypotheses we develop a unique, hand collected, database of entrepreneurs who recently filed for firm bankruptcy. 310 telephone interviews were conducted (response rate 65%) directly followed by a mail questionnaire. After a three-wave mailing (i.e. two reminders) 147 valid mail questionnaires were returned (response rate 31.2%). This paper constitutes an important step in advancing empirically valid theory of emotional responses to entrepreneurial failure.