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A risky decision or an informed choice: Re-entry after firm failure
Jönköping University, Jönköping International Business School, JIBS, Business Administration.
Jönköping University, Jönköping International Business School, JIBS, Business Administration.
(English)Manuscript (preprint) (Other academic)
Abstract [en]

We use human capital theory to investigate how entrepreneurs frame the decision to re-enter self-employment after experiencing firm failure. We suggest that in the context of re-entry individuals have valuable information regarding the return on their human capital in self-employment and factor this into their decision making. We develop hypotheses that incorporate this reduction in uncertainty regarding the returns to human capital in self-employment for predicting the likelihood that an individual re-enters self-employment after experiencing firm failure. We explain our results using human capital theory and prospect theory and suggest that there are two types of entrepreneurs who re-enter after experiencing firm failure: those who make an informed choice based on the return on their human capital in self-employment and those who take the chance to “win back” prior losses.

National Category
Business Administration
Identifiers
URN: urn:nbn:se:hj:diva-19691OAI: oai:DiVA.org:hj-19691DiVA: diva2:562576
Available from: 2012-10-25 Created: 2012-10-25 Last updated: 2012-11-08Bibliographically approved
In thesis
1. After Firm Failure: Emotions, learning and re-entry
Open this publication in new window or tab >>After Firm Failure: Emotions, learning and re-entry
2012 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

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.

Place, publisher, year, edition, pages
Jönköping: Jönköping International Business School, 2012. 269 p.
Series
JIBS Dissertation Series, ISSN 1403-0470 ; 084
National Category
Business Administration
Identifiers
urn:nbn:se:hj:diva-19692 (URN)978-91-86345-37-2 (ISBN)
Public defence
2012-11-23, B1014 at JIBS, University Campus Gjuterigatan 5, Jönköping, 10:00 (English)
Opponent
Supervisors
Available from: 2012-11-08 Created: 2012-10-25 Last updated: 2012-11-08Bibliographically approved

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CiteExportLink to record
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Citation style
  • apa
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Language
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