ABSTRACT - Lund University...
Transcript of ABSTRACT - Lund University...
Learning from Entrepreneurial Failure: A study of the extent to which learning reported by entrepreneurs
been applied in their subsequent entrepreneurial endeavor
Written by Sukumal Somboon and Sara Grundstrom
A thesis submitted toSten K. Johnson Centre for Entrepreneurship in
School of Economics and Management at Lund University
In partial fulfillment of the requirements for M.Sc. in Entrepreneurship, New Venture Creation
9th May 2014
ACKNOWLEDGEMENT
This publication is a part of our research work at Lund University for the Master’s in
Entrepreneurship program. We would like to express our appreciation to our families and the
Swedish Institute for their great support.
TABLE OF CONTENT
SABSTRACT 1
INTRODUCTION 2
LITERATURE REVIEW 5
Failure in Entrepreneurship.............................................................................................................................................5
Entrepreneurial Learning Process.................................................................................................................................6
Lessons from Entrepreneurial Failures.......................................................................................................................8
Implementation of Learning Outcomes....................................................................................................................11
METHODOLOGY 14
Sampling Method................................................................................................................................................................ 15
Interviewees Pre-Screening and Selection..............................................................................................................15
Data Collection..................................................................................................................................................................... 16
Data Analysis........................................................................................................................................................................ 16
FINDING RESULTS 18
Backgrounds of Entrepreneurs....................................................................................................................................18
Entrepreneurial Failure...................................................................................................................................................19
Learning through Reflecting and Coping.................................................................................................................23
Learning Outcomes from Past Failures.....................................................................................................................26
Whether or Not Entrepreneurs Apply Learning Outcomes.............................................................................29
DISCUSSION 31
Failure upon Entrepreneurs’ Experiences...............................................................................................................31
From Learning to Knowledge........................................................................................................................................32
Implementing Learning Outcomes in Subsequent Entrepreneurship.......................................................34
Extent of Learning Outcome Implementation........................................................................................................36
CONCLUSIONS AND IMPLICATIONS 38
LIMITATIONS 39
LIST OF REFERENCES 41
APPENDICES 45
ABSTRACT
Failure in entrepreneurship is considered as part of the entrepreneurial learning process
yet certain entrepreneurs fall for the same counterproductive mistakes again. This leads to the
ambiguity whether learned lessons from failure are beneficial to entrepreneurs or if it is just
optimistically overrated. This qualitative study focuses deeper in to how entrepreneurs perceive,
attribute and cope with failure and how learned lessons from past failures are applied in
subsequent ventures. Respondent entrepreneurs were selected through a mix of convenience and
purposive sampling. Semi-structured interviews were conducted to gather data from individuals
who have previously failed in entrepreneurial projects but reentered an entrepreneurial career.
Entrepreneurs was for this reason comparable as well as the definition of failure being that the
entrepreneurs own expectations of their venture was not met rather than failure as a result of
bankruptcy. The study examines their learning process from reflecting on failure to coping
strategies and most importantly, knowledge application. This research reveals that unless
individuals reflect on learning outcomes they gained from their experience and implements them
subsequently; such lessons are meaningless no matter how valuable they are thought to be. The
implementation of learning outcomes is the key factor that differentiates entrepreneurs who
actually gain positive impacts from their failures apart from those who gain negative ones.
Keywords: failure in entrepreneurship, coping with failure, entrepreneurial learning, integrative
learning, knowledge implementation
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INTRODUCTION
Gibb (1997) describes failure in entrepreneurship as the ultimate form of trial and error
and as the key approach from which entrepreneurs learn. In order for entrepreneurs to make
sense and transform failure to success, they “must learn from the failure”, “bounce back and start
again to apply what they have learnt” (Ucbasaran, 2011, p. 12). Accordingly, entrepreneurs
should prepare themselves to understand and be able to handle failure in entrepreneurship.
McGrath (1999) indicates that failure in the entrepreneurial process is inevitable but can be
served as an opportunity for entrepreneurs to learn and develop. Also, John Maxwell (2012,
p. 16) stated in his book that “Failure is not final - failure is simply a price we pay to achieve
success and if we learn to embrace that new definition of failure, then we can move ahead. It’s
the price you pay for success”.
It is claimed that failure in entrepreneurship represent a tough yet priceless learning
experience that nurture entrepreneurs for uncertainty and pressure in entrepreneurship. However,
it is not clear how entrepreneurs that believe they have encountered failure are using their
knowledge in future endeavors and how this process proceeds. Cannon & Edmondson (2001)
explicates how negative feelings about failure hinders immense reflections to effectively reflect
from failures, having positive attitudes toward failures would be an essential strategy for
entrepreneurs to cope and learn from their mistakes and push themselves forward (Politis &
Gabrielsson, 2007). Consequences of failures can cause effects for entrepreneurs in four aspects
that are economic, social life, psychology, and physiology (Singh, Corner & Pavlovich, 2007).
Nevertheless, entrepreneurs can cope with their failures through problem-based or emotional-
based strategies (Drnovsek, Ortqvist & Wincent, 2010). By doing so, entrepreneurs would
overthrow the grief of failing and can then balance it out resulting in moving forward toward
success (Shepherd, Wiklund & Haynie, 2009). Success does not necessarily mean never fail or
having the world at one’s feet but can simply mean never repeating the same failure for the
second time.
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Despite entrepreneurial failures can positively affect entrepreneurs, the effects do not
automatically occur just because entrepreneurs fail (Ucbasaran, 2011). To beneficially learn from
past failures, entrepreneurs must reflect on and take actions toward past failing experiences
(Cope & Watts, 2000; Minniti & Bygrave, 2001; Shepherd, 2003). One of the crucial actions that
entrepreneurs have to take is knowledge implementation; learning outcomes would become
useless if entrepreneurs did not actually apply explicit knowledge they have learned through their
practical experiences in the new ventures they embark on. Because learning from failures can
assist entrepreneurs to move forward to success (Cope, 2011; Politis & Gabrielsson, 2007;
Shepherd et al., 2009), it is important to know how entrepreneurs do to benefit from failure.
One of the extended areas of studies suggested by Singh et al. (2007) and Cope (2011) is
an exploration to which extent entrepreneurs have indeed applied learning outcomes associated
with past failures in their future entrepreneurial process. By taking the study of Burgoyne and
Hodgson (1983) into account, entrepreneurs learn from their failures differently which can be
categorized to three distinctive learning levels. Therefore, a deeper investigation into the extent
of knowledge implementation can indicate which learning level entrepreneurs are at and
differentiate learning outcomes of each level. Consequently, the authors have identified the
research gap as whether or not the entrepreneurs actually exploit their learning outcomes in their
subsequent entrepreneurship and to what extent they apply such knowledge as stepping-stones
for success in their current ventures. To go beyond current research studies and fulfill this gap,
this research aims to comprehend the phenomenon of learning from entrepreneurial failure
through knowledge implementation from experiences of entrepreneurs who have faced failures
in previous entrepreneurship but still have re-entered into entrepreneurial projects. By doing so,
the current studies in entrepreneurial failure and learning process will be connected and broaden
into knowledge implementation area. The understanding in integration between learning
outcomes and knowledge application would benefit entrepreneurs in overcoming failures and
moving forward. Accordingly, the following research questions are outlined:
Have the entrepreneurs been able to apply what they learned from failure?
If so, to which extent have the entrepreneurs implemented their learning outcomes?
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The study proceeded as follow; literatures concerning topic of failure, learning outcomes
from failure, and learned lessons implementation will be presented and explained. Main
frameworks that were used are the combination of academic researches from Burgoyne and
Hodgson (1983), Singh, Corner, and Pavlovich (2007), and Ucbasaran, Shepherd, Lockett, and
Lyon (2013). The method section is outlining stages of the research procedure. Results are
presented elaborating on key themes. Research questions are answered in the discussion
implementing literature review and finding results from the interviews. Then, this research is
concluded with the main findings and limitations.
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LITERATURE REVIEW
FAILURE IN ENTREPRENEURSHIP
In entrepreneurship, most theories focus on new venture creation and growth through the
process of business opportunities recognition and commercialization in conjunction with failure
avoidance (Shepherd, 2004). Nevertheless, failure in entrepreneurship cannot be completely
evitable and is pervasive among startups. According to statistics, half of businesses established in
Europe closed down within five years of their operations (European Commission, 2013). The
situation is even worse in the United States where 50% of startups could not survive in year four
and less than 30% of them succeed after ten years of operations (Statistic Brain, 2014). Before
entrepreneurs eventually prevail with their endeavors, they generally failed 3.8 times in average.
This figure is adopted from John Maxwell’s book Failing Forward (2012) that encourages
entrepreneurs to shift their negative perceptions toward failures into positive ones. Maxwell
elaborates on the right attitudes toward mistakes and the determination to learn from them
because he believes that these topics could be used for distinguishing entrepreneurs who are
actual success achievers apart from typical failures.
The first and foremost thing to do before this study shall begin is to define what failure is
in entrepreneurship. Entrepreneurial failure has not had a universally accepted definition yet.
Each researcher defines it distinctively varied by their points of views. Even in the same area of
“failing forward”, dissimilar definitions of entrepreneurial failure were proposed. McGrath
(1999, p. 14), whose study focused on real options reasoning during entrepreneurial process with
intention to re-conceptualize failure, concludes, “…Failure is the termination of an initiative that
has fallen short of its goals”. On the other hand, the study of Shepherd, Wiklund, and Haynie
(2009, pp. 135) focusing on the financial and emotional costs of failure suggested that failure
happens when venture has “…a fall in revenues and/or rise in expenses are of such magnitude
that the firm becomes insolvent and is unable to attract new debt or equity funding;
consequently, it cannot continue to operate under the current ownership and management”.
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According to the above definitions, failure is defined differently upon researchers’
perspectives and focus of their studies. It is deviation from expectation of favorable outcomes in
conjunction with both avoidable and unavoidable consequences of entrepreneurial process
(Cannon & Edmondson, 2001). In the interest of this study, the authors tend to agree with
McGrath’s definition in which varies by the goal of entrepreneurship. Different entrepreneurs
would perceive failure differently in accordance to the their personal goals and the roots of
failure would be attributed under diverse circumstances (Ucbasaran et al., 2010). To enlarge
upon the definitions provided by McGrath (1999) and Ucbasaran et al. (2010), failure already
happened once the goals have slipped away; it does not have to cause the end of entrepreneurial
project nor any financial losses. To define it within the scope of this research, entrepreneurial
failure is a discontinuance of the actions pursuing entrepreneurial goals. With this definition,
entrepreneurs can clearly identify deviations from goals that they gave up and identify their own
failures. If ones are not able to realize that they already failed, it is unlikely for them to start
learning from failures. Thus, recognizing and accepting failure is an essential stage that would
encourage entrepreneurs to enter into entrepreneurial learning process.
ENTREPRENEURIAL LEARNING PROCESS
Experiencing failures in entrepreneurship is an expensive opportunity that
entrepreneurs can benefit from by extracting essential insights from failures and utilizing
acquired knowledge in their learning process (Shepherd, 2003; Sitkin, 1992). The paradigm of
negative perception toward failures had shifted to the optimistic one because a number of
scholars advocate positive learning outcomes that can be gained through failures. The new theory
believes that individuals learn more efficient from their experiences in failures over in successes
(McGrath, 1999; Shepherd, 2003; Sitkin, 1992). Shepherd (2009) argued that the learning
process includes a function of how individual feel – not solely how and what individual think.
This statement is supported by Cannon and Edmondson’s (2005) study that staying positive
while studying from failing experience, entrepreneurs can confront, review, and handle the
matters rationally. Having the right attitude toward failures is beneficial for entrepreneurs to
better learn from their trials and errors (Politis & Gabrielsson, 2007).
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Many researchers suggest that entrepreneurs must be able to pinpoint causes of failures
before they can actually learn from failure (Cannon & Edmondson, 2001; Politis & Gabrielsson,
2007; Sitkin, 1992). Cardon, Stevens, and Potter (2011) categorized the causes of failures into
two groups that are mistakes and misfortunes. If entrepreneurs themselves cause the failure, such
failures are considered as mistakes; otherwise, they are considered as misfortunes if they are
beyond entrepreneurs’ abilities to control (Cardon et al., 2011). In accordance to this
classification, it can be deemed that mistakes are internal reasons whilst misfortunes are external
reasons. Nonetheless, Ucbasaran (2011) argued that meaningful learning from failure could not
be executed automatically or straightforwardly. Only realizing the causes of failures would not
immediately make entrepreneurs learn. Mere failures can spark no learning; both personal
reflection and direct action are required from entrepreneurs in order to stimulate learning from
past failures and improve possibilities to succeed in subsequent entrepreneurship (Cope & Watts,
2000; Minniti & Bygrave, 2001). Furthermore, Cope and Watts (2000) suggests that reflecting
upon past failures during a learning process would make the entrepreneurial learning process
become more efficient. In order to achieve critical reflectivity, entrepreneurs have to seek for the
essence of failures and rethink on their personal understandings (Marsick & Watkins, 1990).
Together with an optimistic outlook, entrepreneurs can transform a stigma of failure into an
opportunity to flourish their future entrepreneurship in the long run based upon their learning
reflections and actions (Politis & Gabrielsson, 2007; Shepherd, 2003).
Failure may be seen as the price that entrepreneurs have to pay in order to reach success
(Maxwell, 2012) and the entrepreneurial learning process would be a long journey to get there.
After persevering against the hardships, entrepreneurs would have very little energy left to
bounce back from a catastrophe (Cope, 2011). Accordingly, entrepreneurs should also learn to
cope from business failure in order to decrease the psychological costs they have to suffer
through the tough time. Singh, Corner, and Pavlovich (2007) define coping with entrepreneurial
failure as cognitive and behavioral efforts to manage the imposing demands comprised by
venture failure. Drnovšek et al. (2010) divides the methods that entrepreneurs cope with their
failures into two strategies – problem-based coping strategy and emotion-based coping strategies.
Singh et al. (2007, pp. 334) identified two main types of coping: “Problem-focused coping is
managing, or changing a problem causing distress while emotion-focused coping regulates
emotional reactions to a problem”. In the finding by Singh et al. (2007), the majority of their
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cases in problem-focused coping was used to deal with the financial aspects of the failure such as
attempts to take legal action to be released from debt, borrowing money from friends and family,
and selling assets to get debt relief. In contrast, emotion-focused coping was aimed at addressing
the psychological consequences of failure and tended to take two forms: reality distortion and
self-deception like avoidance behavior, denial strategies, to reduce the generation of negative
emotions and secondly restoration, which emphasized positive imaging and personal re-
examination.
Hence, coping with failures is vital in learning process for entrepreneurs to recover from
grief and facilitate learning process enhancement in order to reinforce their motivation and
optimism in subsequent entrepreneurship (Shepherd et al., 2009). To conclude from above
explanation, going through entrepreneurial learning process will not automatically provide
entrepreneurs valuable lessons but will do only when entrepreneurs reflect on and take actions
toward from their past failures with the right attitudes (Cope & Watts, 2000; Politis &
Gabrielsson, 2007; Shepherd, 2003; Ucbasaran, 2011).
LESSONS FROM ENTREPRENEURIAL FAILURES
After the entrepreneurs had failed, they would be influenced by multifaceted aftermaths
or the costs of failures (Ucbasaran, Shepherd, Lockett & Lyon, 2013). In the case that an entire
entrepreneurial project had come to an end, Shepherd (2003) compared the negative emotion of
loss of a venture as a grief over the loss of a loved one. This vividly illustrates how much pain
entrepreneurs can come to endure. Nevertheless, the entrepreneurship extinction does not only
impact either financial or psychological aspects of an entrepreneur’ life but also significantly
affect other facets including social, physiological (Singh et al., 2007), professional, and
entrepreneurial (Cope, 2011). Within the scope of this research, the authors categorized
entrepreneurial learning outcomes into four particular lessons based on the framework of
entrepreneurial failure effects used by Singh et al. (2007). As a result, the lessons from failures
that entrepreneurs reflect on are distinguished within economic, social, psychological, and
physiological aspects.
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ECONOMIC ASPECT
Monetary loss is an anticipated economic consequence when entrepreneurs fail; however,
the economic aspect in this study covers the areas beyond financial costs. The degree of
economic loss is varied on a case-by-case basis. It is not only capital and investment in the
business that vanish, these financial costs sometimes are the reasons that put entrepreneurs into
personal debts and would take years to clear them up (Cope, 2011) In a broader perspective, the
costs of economic effects include an opportunity such as an absence or a reduction of personal
salary (Ucbasaran et al., 2013) and the value of alternatives forgone (Arora & Nandkumar,
2011). The collateral damage continues even though some of those people decide to turn their
back to entrepreneurial life and seek employment. The defeated entrepreneurs have to face
extremely difficulties to get hired after they had failed creating new ventures resulting in lack of
incomes (Singh et al., 2007). Furthermore, the higher the opportunity costs that entrepreneurs
have; the more aggressive in entrepreneurship they would be (Arora & Nandkumar, 2011). This
would enable large economic impacts to be plausible to occur.
SOCIAL ASPECT
Failure could affect social life of entrepreneur at both personal and professional levels
(Ucbasaran et al., 2013). It might not only cause the death of a business but also the end of social
network of bilateral or multilateral agreements (Harris & Sutton, 1986). The feeling of guilt and
obsoleteness aggravate entrepreneurs’ inability to interact with others (Cope, 2011). The
regression of relationships can be the result from the stigma with failures that the devastating
entrepreneurs are distant themselves from civil norms (Sutton & Callahan, 1987). More
specifically, the entrepreneurs who suffer from self-stigma believe society has a pessimistic
outlook toward them; therefore, they lower their self-esteem and even isolate themselves into
loneliness (Singh, Corner & Pavlovich, 2011). In some cases the situation is getting worse as
reputation of an entrepreneur is ruined (Ucbasaran et al., 2013). The disconnection with society
would make it harder for entrepreneurs to properly function in their daily life. Withal, the
intension in their relationships could get worsen and ultimately lead to the break up of personal
intimate relationships including marriages (Singh et al., 2007). Besides, stigma associated with
failure may not only have negative impacts toward current social life but also toward
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discrimination in job opportunities and credibility to access resources in the future (Sutton &
Callahan, 1987).
“In Europe, a serious social stigma is attached to bankruptcy. In the USA bankruptcy
laws allow entrepreneurs who fail to start again relatively quickly and failure is considered to be
part of the learning process. In Europe those who go bankrupt tend to be considered as “losers”.
They face great difficulty to finance a new venture.”
- European Commission (1998, p. 3)
PSYCHOLOGICAL ASPECT
Psychology covers an extensive area of multiple studies and could have both positive and
negative effects. Entrepreneurs can either feel despair towards entrepreneurship or feel highly
passionate to make a huge come back (Ucbasaran et al., 2013). Because this study focuses on
how entrepreneurs turn negative effects into positive ones, the authors would like to specify the
scope of psychological aspect in this research study only on its negative part within this section.
Ucbasaran et al. (2013) suggested that emotion and motivation are two interrelated psychological
costs underlying in experience of entrepreneurial failure. Mantere, Aula, Schildt, and Vaara
(2013) proposed two types of psychological process that support this characterization. The first
process is related to managing emotion associated with failure experience and the second process
is related to maintaining self-esteem in order to pertain motivation (Ucbasaran et al. 2013;
Mantere et al., 2013) Between the entrepreneurs and their ventures, there is an emotional bond
(Shepherd, 2003). Accordingly, most entrepreneurs are in grief when they face the adverse
outcomes (Shepherd, 2004). Their emotional state is altered after a journey when their business
has come to an end. A number of emotions, for instance, guilt, shame, inferior, disappointment,
and sorrow are unpleasant feelings that entrepreneurs have to endure through the grief period
(Bonanno, Goorin & Coifman, 2008). Interestingly, Parkes and Weiss (1983) suggested that the
longer period of time that entrepreneurs try to avoid the looming failure; the greater duration
entrepreneurs can emotionally prepare themselves to deal with losing their creation.
Nevertheless, there is a drawback to do so. Delaying the collapse of business can cost
entrepreneurs greater financially (Shepherd, Wiklund & Haynie, 2009).
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PHYSIOLOGICAL ASPECT
Physiological aspect associated with failure highly relates to the psychological
consequences. Surprisingly, a number of entrepreneurs are incapable to keep the balance of their
physical health while running a business, which results in deteriorating health (Singh et al.,
2007). Shepherd (2003) elaborated that the involuntary separation apart from their beloved
ventures could put entrepreneurs in grief. Grief – the major painful experience of the emotional
costs – sometimes trigger undesirable physiological symptoms that can be ranged from small
signs like weight loss and insomnia to serious illness such as decreased immune system and high
blood pressure (Cope, 2011; Singh et al., 2007; Singh et al, 2011). If entrepreneurs are in grief,
they have to gone through the five stages of grief including denial, anger, bargaining, depression,
and acceptance – if they can cope (Kübler-Ross, 1969). While struggling through each stage,
entrepreneurs are prone to have physical reflects such as fatigue, anxiety, nausea, panic attacks,
phobias, and et cetera (Shepherd, 2003; Singh et al., 2007). In conclusion, the combination of
negative consequences in consequences in psychology and physiology could push distressed
entrepreneurs into declined physiology at different degrees of severity (Cope, 2011; Shepherd,
2003; Singh et al., 2007). The learned lessons within physiological aspect could lead
entrepreneurs to know how to balance their works and lives.
In the respect of this research, learning outcomes from a proper entrepreneurial learning
process will lie within four aspects of lessons in economic, social, psychology, and physiology.
However, knowing what lessons entrepreneurs obtained from their past failures only cannot
indicate whether or not entrepreneurs benefit from these learning outcomes. Without taking any
actions toward past failures by learning outcomes implementation, entrepreneurs solely gain the
knowledge but not any advantages from failing experiences. The way entrepreneurs apply such
knowledge in their subsequent ventures will indicate how they profit from failures.
IMPLEMENTATION OF LEARNING OUTCOMES
It is important to underline that learning from failure does not occur automatically
(Ucbasaran, 2011) but happens when entrepreneurs reflect on what causes failure and react with
their existing knowledge to carry out subsequent entrepreneurial actions more efficiently and
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effectively (Shepherd, 2003). Additionally, Cope (2011) highlights that some entrepreneurs may
fail to learn due to an inability to effectively face what happened. Certain entrepreneurs may
want to think they have learned valuable lessons in order to rationalize what may otherwise be
considered an unproductive period of their lives (Cannon, 1995); thereby, repeating the same
mistakes in future activities (Shepherd, 2003).
However, entrepreneurs have the opportunity to reinvent themselves and become stronger
after experiencing failure and reflecting on faults (Cope & Watts, 2000; Seligman, 2011). If
entrepreneurs decide to see failure as something they can benefit and learn practical knowledge
from instead of something negative (Shepherd, 2003; Cope, 2010), lessons drawn from failure
with positive attitude can contribute to unleashing new perspectives of perceiving, thinking, and
acting (Sitkin, 1992). To do this, missteps have to be transformed into stepping-stones toward
success; entrepreneurs must implement knowledge they have learned afterwards (Ucbasaran,
2011). Entrepreneurs can implement the learning outcomes by making a connection between
their personal skill set and lessons from their failing experiences so they can grab more authentic
understandings (Huber, Hutchings & Gale, 2005) and then utilize learning outcomes by using the
extracted knowledge into other entrepreneurial actions; this is not limited to only repeating the
old entrepreneurial process or starting a entirely new venture (Shepherd, 2003; Shepherd, 2009;
Shepherd et al, 2009). A lack of knowledge implementation could deplete the value of high-
priced lessons intrinsic in failing experience and jeopardize the opportunity to develop both
entrepreneurial skills and new projects. Ultimately, knowledge implementation is key in
determining if the learning process will move entrepreneurs forward.
Learning implementation associated with failure is characterized by Burgoyne and
Hodgson (1983) into three levels and can be summarized as follows:
Level 1 – Certain legitimate learning outcomes are obtained but have no long-term effect
toward entrepreneurs.
Level 2 – Entrepreneurs’ learning outcomes are transferable from current case to another
specific situation.
Level 3 – Entrepreneurs’ learning outcomes were able to reframe their understandings
upon reflections.
The level two and three of this learning classification are used as a framework to scope the extent
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of knowledge implementation. The reason why level one gets omitted is because it does not
imply any signs of learning outcomes application; only lessons are obtained at this level. The
vivid difference between level two and level three is the object effected by knowledge
implementation. The extent in which entrepreneurs apply learning outcomes from past failures
into their current ventures differentiates the learning level of and benefits for each entrepreneur.
At level two, entrepreneurs implement lessons they learned from one entrepreneurial project to
another (Burgoyne & Hodgson, 1983) resulting in subsequent ventures get positive effects or at
least will never run into the same mistakes that entrepreneurs used to make. Whereas,
entrepreneurs who are in learning level three apply the knowledge on to themselves at a personal
degree due to reflection (Burgoyne & Hodgson, 1983). These three levels make it easier to
understand levels of implementation of learning outcomes (knowledge) entrepreneurs have
encountered through their experience of failure.
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METHODOLOGY
The method used for this research is qualitative research design. The choice of design
was supported by the research questions that strive to give a detailed level of understanding to be
developed (Maxwell, 2005) in the phenomenon of entrepreneurial failure, learning, and
knowledge implementation. The choice was based on the needs and demands of this particular
study (Morgan & Smircich, 1980). Further a qualitative phenomenological methodology with a
actorsoperative paradigm was developed to give the researchers potential to generate the richest
and most viable dataset and offer the greatest potential to produce significant research outcomes
answering defined research questions. Researchers considered alternative research designs
however as the filed of entrepreneurship is relatively young, this method supports the premise
that the qualitative phenomenological method may be appropriate because it is more oriented
toward discovery and allows researchers to focus on the subject’s individual experience, which
better explain the subject’s reality (Clark, 1998; Huberman & Miles, 1994). Moreover, this
method provides researchers with a greater flexibility in obtaining rich data that provides
opportunity to develop substantial research conclusions based on real world entrepreneurial lived
experiences. This design also focuses on the understanding dynamics present within single
settings (Weber, 1990) bringing forward the meaning participants place on events and processes
(Miles & Huberman, 1994).
The purpose of this research is to better understand the phenomenon of entrepreneurial
failure, learning, and knowledge implementation. The authors aim to identify important themes
among researched entrepreneurs and provide a rich description of the reality created by those
themes as they are lived out in a particular setting. Researchers have taken in consideration that
the researched entrepreneurs were explaining and filtering everything through their own personal
framework of beliefs and values. This means that it is not believed by the authors that there are
any absolute truths, but that reality is subjective and that there are multiple points of view that
can be understood by examining the perceptions of the individuals. The researchers are also
aware of the fact that participants’ backgrounds, opinions and beliefs influenced
phenomenological standpoints. This effect were limited through careful data preparation, coding,
and interpretations, the results of this qualitative analysis can therefore support the development
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of new theories, as well as validating existing theories and provide descriptions of particular
settings or phenomena (Weber, 1990)
SAMPLING METHOD
A mix of convenience sampling and purposive sampling method was used to identify a
sample group that had experienced discontinuance of a section or an entire project. This was
done with help from contacts within Sten K. Johnson Centre for Entrepreneurship. The definition
of failure was for the purpose of this research explained, as the entrepreneurs’ own expectations
not being met as main focus of the failure. According to Ucbasaran et al. (2010), it is not only the
sale or closure due to bankruptcy, liquidation, or receivership that cause failure but also that the
business or project failed to meet entrepreneurs’ expectations. McGrath (1999) also concludes
that failure is the termination of an initiative that has fallen short of its goals. Respondents in this
research were comparable as they all shared the belief that they had failed to meet their
expectations at least once in a business project or at several occasions.
INTERVIEWEES PRE-SCREENING AND SELECTION
Initially, ten entrepreneurs were approached within the Skåne region due to convenience
for face-to-face interviews. An initial email was sent to the potential respondents, explaining the
aim of the research and the purpose of the interviews. This to ensure that they were the right
matches for this qualitative study, the purpose of the questionnaire was to identify
entrepreneurial experience within the group, details of their entrepreneurial projects, experience
of failure in previous projects (See Appendix A for the preliminary interviewee selection
questionnaire). Researchers then selected respondents from their answers in the questionnaire
that would allow for rich data to be collected.
The final sample group comprised of six entrepreneurs, six cases fits within Eisenhardt’s
(1989) criteria (4-10) to enable inductive patterns to emerge from data. The selected group was
divided into two groups, less than five years of entrepreneurial experience and five years above.
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This would allow research to identify any patterns between experience and learning from failure.
One of the selection criteria was also that they were now working on one or more projects, this to
allow exploring if they are using what they learnt from past failures in their new endeavors.
Respondents’ names are not disclosed for privacy reasons to allow respondents to speak freely in
the interviews; thereby, fictitious names are assigned to all respondents.
DATA COLLECTION
Data was collected using semi-structured interviews organized around a set of
predetermined open-ended questions, organized by categories. The main reason for choosing
interviews as the method of data collection instead of alternative methods was that during
interviews participants are asked about their experiences in a way that allows them to freely pick
specific memories and reflections in their own terms, rather than having terms imposed on them
by the interviewer. Also, a depth interview represents a basic method of collecting data, which
can provide the richness and in-depth experiential account of the event in the life of the
respondent (Fontana & Frey, 2005), required to truly understand the issue. Individual interviews
were used as it allows for the interviewer to delve deeply into social and personal matters.
(DiCicco-Bloom & Crabtree, 2006) This was in accordance with research questions that focus on
the entrepreneurs’ personal perception of the event of failure according to McGrath (1999) and
Ucbasaran et al. (2010). Interviews were conducted face-to-face and held within the allocated
office space for New Venture entrepreneurs at IDEON.
Categories and questions were developed according to frameworks discussed in previous
chapter. The interviews were open-ended; questions were designed to focus respondents on the
framework and give the interviewees the chance to tell their stories with minimal interruption by
the researchers. Interviews were recorded by mobile device and transcribed to ensure that no
details were missed. Interviews were conducted in Lund in April 2014 and each session lasted
for approximately one hour (see Appendix B for the interview questions).
DATA ANALYSIS
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Transcripts were analyzed for the purpose of examining the link between coping with
failure and how entrepreneurs are using what they learnt from their previous failures,
subsequently what benefits failure has engendered to them. To understand how entrepreneurs
make certain choices and how they behave, it is crucial to bring forward the meaning and
significance they give to specific actions and behaviors. The initial steps in analyzing interviews
was to listen to them in a detailed manner taking notes of each respondent's answers in order to
identify themes mentioned by each interviewee. This was done separately by researchers and
later compared to ensure that appropriate themes were selected from interviews, relating both to
frameworks and research questions.
Themes were identified and divided under Singh, Corner, and Pavlovich’s (2007, pp.
331) “Coping with entrepreneurial failure” four aspects: economic, social, psychological, and
physiological needed to fully comprehend how a person copes with failure. Themes were also
identified to understand coping strategies taken by entrepreneurs to overcome their failures. This
was done by dividing themes into Drnovšek, Ortqvist, and Wincent’s (2010) coping strategies,
problem-based and emotion-based to further explain entrepreneurs learning process. Further to
understand entrepreneurs learning outcomes associated with failure, researchers used Burgoyne
and Hodgson (1983) three levels to explain learning outcomes.
Multiple frameworks were used as this helped researchers to limit the risk of coming to
false conclusions or premature ones as it limits inherent cognitive biases (Eisenhardt, 1989). The
real names of respondents are also replaced with aliases in order to protect their true identities
and to allow respondents to freely tell their stories. Results were then presented following the
logic of questions and theory presented in the previous chapter. Direct quotations were included
in the text to allow the reader to better understand the thoughts of the respondents, the context
and the emotions, and allow them to immerse into the situation. These thick descriptions also
lessened the analysis. (Eisenhardt, 1989).
17
FINDING RESULTS
The finding results are based on the information from the interviews and presented within
this section. They are divided into five themes and structured in relation to thematic analyses
within aforementioned theoretical frameworks. The main quotations and finding results are
explained according to the following themes. The first theme investigated is entrepreneurs’
backgrounds where entrepreneurs were asked to elaborate on their entrepreneurial projects and
experiences. The second theme focuses on entrepreneurial failures, respondents’ experience of
failure, and their perceptions of how this event affected their lives. This followed by exploring
the cause of the failure in terms of external and internal factors causing the failure. The third
theme is learning through reflecting and coping that examined how entrepreneurs coped with the
failure and which coping strategies entrepreneurs applied whether it is problem-based or
emotional-based or both strategies. Next step is to explore how the entrepreneurs learned from
their failures; all respondents were allowed to express what they believe they learned from their
failures. The final theme is implementing learning outcomes in subsequent entrepreneurship that
dig deeper to find out if entrepreneurs have applied learning outcomes in their current projects.
The authors are here elaborating on key themes together with quotes to clearly get an overview
of the results of the interviews.
BACKGROUNDS OF ENTREPRENEURS
There were six interviewees selected from our pre-screening process. Alias names –
Anders, Beatrice, Calle, David, Erika, and Fredrik – were used to identify each respondent
instead of using their real names. The following information presents their backgrounds.
Anders has been involved in several startups although he only identified himself as an
entrepreneur for the past three years. He spent several years in college in Lund and also studied
aboard as an exchange student in both China and Norway. Anders explained that he is always 18
looking for new challenges and this might be a reason why he is an entrepreneur. One of his first
projects was in a non-profit organization that he built with his friends. He was also involved in a
few companies that done advertising on bicycles and building mobile application for nursing
homes. At the present time, Anders is working with LUSIC and other social entrepreneurial
projects.
Beatrice is one of the most experienced entrepreneurs in this research; she had her own
television production company for the past eight years that allowed her to get involved in many
entrepreneurial projects during this period. Her company was going well but she wanted to enter
into the social entrepreneurship field so she decided to start a new venture that focuses on
creating branding content within the scope of corporate social responsibility.
Calle is a co-founder of a company producing and importing leather bags from Africa
since three years back. He co-found it with his local friends; this venture is his first
entrepreneurial project. While being a student at the Master of Entrepreneurship program at Lund
University, Calle is also starting up another project selling fire logs made from reused coffee
with his classmates.
David is a serial entrepreneur; he explains that he tries out new ideas daily to see if they
have valid business potential. David is the founder of many new media marketing and lifestyle
companies but his first one was established four years ago. At the moment, David is dedicating
most of his time to his marketing company.
Erika has six years experience in entrepreneurship. Her entrepreneurial career started
when she opened her own salads bar. Her business went well for few years but then it had to be
closed down. Erika explained that she finds it hard to work for someone else so she has become
an entrepreneur. Fortunately, she found her way back to run a business and is now selling
renewable materials to Swedish building contractors.
Fredrik owns two food-trading companies and has worked in this field for eight years.
His first company was shut down before he consecutively started the second one. Besides doing
a business in food trading, Fredrik has just started a consultancy firm working with import goods
between Sweden and Middle-East Asia. He is also a graduate student in entrepreneurship
program at Lund University.
19
ENTREPRENEURIAL FAILURE
Respondents were asked in several questions how they perceived failure in terms of
entrepreneurship, descriptions of failures they have faced, and goals in those projects. All
entrepreneurs shared that they had not experienced any major business losses that had resulted in
major bankruptcy but all had experienced failure in terms of not meeting their goals through their
entrepreneurial endeavors.
ANDERS
According to the interview responses, Anders who has been involved in several startups
explained failure as something natural occurring when working in projects and could be used as
a tool to learn and to develop what you do in a better way. The failure Anders described was in a
project he was running which goal was to build a co-working space where social entrepreneurs
could meet and help each other develop their ideas. The failure that he experienced was that their
management team was not able to collaborate and communicate effectively resulting in the
dropout of the hosting sponsor. They did not really listen to each other and even got annoyed
working together. The situation went even worse when everybody tried to fight against each
other so no clear communication was made among colleagues; therefore, they were unable to
work in a team effectively. Ultimately, the dropout of sponsor and conflicts within management
team had put the entire project into termination.
"Even I did not feel a huge difference I did feel a tension and I am sure that my friends
noticed that I was a more agitated than normal"
BEATRICE
Beatrice has many years of experience as an entrepreneur but she still face failure when
her initial goals was not met. She described the goals of the project was to get her production
company up running in a short amount of time. While she was putting all of her efforts to make it
happen, she felt a lot of pressure and sometimes thought of how hard it is to be a female
entrepreneur. If her project was not going ahead, it meant she would not have any income to
20
support herself and her children. Under the high pressure, Beatrice decided to focus on getting
funded by a sole investor in order to receive financial support as soon as possible. It turned out to
be a poor decision relying on only one individual.
“I felt a lot of pressure. I put that on myself and I think it might be that being a woman is
sometimes hard as an entrepreneur.”
“The project was not going a head which meant that I would not have any money coming
in, that made everything every difficult to plan ahead.”
“I was too reliant on this guy and I did not have a backup plan.”
CALLE
Calle has had his own business selling leather bags for the past three years. He felt that
the failure that he experienced been that he lost a lot of opportunities. His goal of the business
was to make a living out of his company. This has affected him economically and
psychologically as he felt that he could have made different choices to increase opportunities for
the business.
“It was the decision of not establishing a team complementing each other that decreased
potential of the project financially.”
“I suppose that I felt regret that I did not bring a new partner in that could help grow the
business.”
DAVID
David has been taking part in many startups especially in new media marketing and is
currently running his own marketing company. David explained that when he started off each
business, he had various points of view toward each venture. He focused on performing well in
business operations but overlooked to establish a business model of each venture that would
make every startup he was involved in financially sustainable which he considers as a failure.
21
“Having no proper business model that would focus on financials made it less
potential.”
“I have to say that I had a different view of business at that time and I listened to old-
school thoughts too much"
ERIKA
Erika started with opening her own salads bar in Skåne at the beginning of her
entrepreneurial career. Her described failure resulted in being forced to shut her first venture
down a few years ago. She said that this unpleasant experience affected all parts of her life in
one-way or another. She explained that she lost her investments and some additional money yet
there was no major loss.
“I lost my initial investments and some additional cancellation costs but I did not die or
anything.”
“When I did not know how to handle the situation I felt frustration and of course I was
irritated that we could not find a solution.”
FREDRIK
Last but not least, Fredrik has eight years experience as an entrepreneur running his own
food export company and a consultancy firm. Failure for Fredrik was when he had to restructure
his whole business a few years back. This had a main effect to him economically because his
family lost investments and some capital but still was not in any major debt. Fredrik said that this
failure actually made him see things from a positive side straight away and new potential
opportunities to do business in other ways.
“I have to say that I was looking at the bright side of what happened. I felt enthusiastic
to close as soon it was possible to work fully on new business model, of course I felt a little
worried at times that we would not have enough money to cover all costs.”
22
“I felt stressed at times but not sure if that was positive or negative, I got out of the
failure on a positive note."
LEARNING THROUGH REFLECTING AND COPING
Respondents were asked to reflect upon what had caused their failure in terms of internal
and external factors to better understand causes and how they attributed the causes of their
failures. All entrepreneurs shared that they could identify both internal and external factors
causing their failure. This was followed by questions around coping strategies divided into the
four aspects that can be affected by failure in order to better understand how they coped with
their failures. Most of the entrepreneurs had a mix between emotion-based and problem-based
coping strategies.
ANDERS
When Anders reflected upon his failure experience he could pinpoint both internal and
external reasons for his failure. One was that he was inexperienced as well as his partners in the
project.
“I was not experienced enough at the time, I was always late in finding solutions and was
not very good at sharing problems with others.”
“I believe that the initiator of the project had preset ideas of how the project should be
run, this resulted in lack of expertise being brought in to help us move on.”
“I should not have stopped discussing with them; that way, we might have kept our
sponsor.”
23
Anders described himself as a very emotional person, which showed through how he was coping
with failure. He applied a complete emotion-based coping strategy by “first looking at myself
and see the situation for what it is” and “realize the importance of reflecting and not overreacting
towards failure”.
“I worked at trying to not blame other people in the project, I have to look at myself and
see the situation for what it is, sometimes I make mistakes but I try to apologize to people fast.”
“I realized the importance of reflecting and not overacting toward failure.”
He also explained that failure in his case did not have any economic effects on his life; however,
from a social point he explained;
“Even I did not feel a huge difference I did feel a tension and I am sure that my friends
noticed that I was more agitated than normal.”
BEATRICE
Beatrice explained that she was taking a fatal chance when she was working on her
project; her decision to rely on one individual did not work out but was difficult to foresee
“What happened was that I put too much belief and time into one single person to carry
me through to the next step.”
“He, my investor, was going through a divorce which made him let go of everything else
and completely let go of our project together.”
Beatrice who was reliant on only a sole investor in her entire project later on managed to find
alternative ways to get herself out of economic difficulties but not funding the project. She then
explained that she believe that her experience, ten years as an entrepreneur, got her through her
difficulties and eased up her coping moment.
“Luckily I was able to find alternative financial support for myself.”
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“I felt anxious that things would not be okay but experience took me through it.”
CALLE
Calle’s internal cause of failure is his decision to team up with people that he was
familiar with rather than the people who compliment each other to grow business whereas his
external reason was based on the fact that his supplier was not being consistent with the quality
of raw material.
“It was my own personal decision to group up with people that I get on with and like, but
that does not necessarily make a great team to grow business with.”
“We had difficulties to get the same quality with each order from the supplier, sometimes
it was very high standards while the next lot would not have the same quality.”
He was the only entrepreneur that only focused on a problem-based coping strategy where he
explained that he “focused on balancing the quality and profit so that we could improve the
quality” to continue his business.
“I spent time to focus on balancing the quality and profit so that we could improve the
quality.”
DAVID
Results show that sometimes the external factors caused the internal as for David that
“listened to old school thinking” which then resulted in “lack of business model”.
“We started with a lack of business model because we had not considered making much
money from the project, I had more a personal goal to make the world better.”
“It was from listening to old-school thinking that making good to the world should not
gain financial benefits. It was really other people judgments that effected us.”25
ERIKA
Erika felt that it might have been her own actions that had an effect of on the failure
however she also believes that it could be circumstantial.
“Like in most cases I get hot-headed and make decisions very fast.”
“In many cases it might have been an effect of my actions but I believe that many
business opportunities just got lost due to circumstances.”
FREDRIK
In Fredrik’s case, his family selected a highly niche product that was difficult to sell; their
product selection is an internal factor. When combining with the external factor, which was a too
narrow market size and inability to make a payment of his customers. His business had
eventually faced the discontinuance. Some grounds were completely unrelated; for instance,
“I had a dream of selling very high quality products that the customers did not
necessarily want, I had to educate them on their eating habits which was harder than I could
have imagined. It was too ambitious and I was too stubborn to adapt with mass demand.”
“There were things that we could not effect like cheques being returned and customers
not paying. It all had an effect, the products where niche which talked to a narrow target
audience which is a small market share which then did not make enough turnover"
LEARNING OUTCOMES FROM PAST FAILURES
Respondents were asked several questions regarding learning from failure, benefits it
could have had and what they learned from their experience of failure. All of respondents agreed
that they learned something from failure; it was not only a negative experience but also a
priceless lesson for the entrepreneurs.
26
ANDERS
Anders explained that he learned the importance of having a “strong team” to have a
successful venture or project. Moreover, he stated that the most important learning outcome for
him was getting to know himself better. He explains that he had to learn how to “put himself
first” in the sense that it will never be a good outcome if he just does things to please others.
Psychologically, he was able to better understand and solve arising issues during the project.
“For a project to be successful you have to put yourself first, really know yourself to be
able to even listen to others.”
“What happened to me was that I had to overcome the conflict of ideas and perspectives,
I think I did through understanding and love.”
BEATRICE
Beatrice’s main learning was that she had to have a back-up financial plan and could not
rely on only one source of investment to fund a whole project. She also realizes that “most things
are in our own control” and it is important to listen to our body and mental state so that we do
not overdo things. This learned lesson comes from her intensive experience according to
Beatrice’s opinion.
“I learnt that you always have to have a back up plan how to get your money in.”
“I now jump on support from all directions, I will not be in the same situation again.”
“I learnt that you could not let yourself be blinded by one individual as unexpected
events can happen which can stop project suddenly.”
“You can do more than you think, most things are in our own control; you have to listen
to the body and mental state it has to do with experience to know how to maintain balance in
life.”
27
CALLE
Calle described himself as an optimistic person. He believes that “If goals are set, even if
you fail along the way, you will start again but not from the beginning”. In common, most of the
entrepreneurs said that they learned in terms of economic effects.
DAVID
David considers having a sustainable business model as “ not a stepping stone but a
flagship” after that he was not successful with his first few ventures.
“I learnt that financials in a project is not just a stepping-stone but flagship.”
ERIKA
After Erika had to close her business down, she believed that she should take longer time
to consider her decisions carefully before making final decisions so the outcome might be
positively different.
“I learnt to consider my decisions a little longer before making them.”
“I now know what is important and what I should spend time on. I did not know that
before.”
FREDRIK
Fredrik also felt that he learnt in terms of economic effects as he realized that securing
supply chain is the most important thing in that field. In addition, he commented from a
psychological perspective that “getting out of your comfort zone” is important to move ahead in
business and not miss other opportunities along the way. He also emphasized that having a
strategic partners in business is much better than competing with them as business rivals. None
of the respondents could say that they had any physiological learning outcomes.
28
“I realized through this experience that securing supply chain properly is very
important.”
“I learned how to get out of the comfort zone to see the opportunity around you.”
WHETHER OR NOT ENTREPRENEURS APPLY LEARNING OUTCOMES
Respondents were asked if they believed that there were any learning outcomes they can
implement in their current ventures. They were also inquired if it is possible for them to fall for
the same mistakes, failures again despite the lessons learned and if any of these failures were
beyond their control. This is for developing a deeper understanding how entrepreneurs apply and
utilize learned lessons in their successive ventures. The majority of respondents believe that the
same thing could happen again due to the external factors affecting their entrepreneurial projects.
David, for example, explained that he could make the same mistake again; however, he would
have dealt with it in a more mature way and try to teach people around him what he learned.
“By rethinking your own mistakes or failures, you have the possibility to help other
people relearn.”
Erika also reported a similar outcome as she claimed to have learned to take time in making
decisions and read it throughout. Despite being aware of her problem, she admitted that she
occasionally is as quick in making decisions now as before.
“I am very careful when making a decision but I am still hot-headed and choose quickly
when I forget.”
Half of entrepreneurs managed to implement their learned lessons from their past failures
into their subsequent entrepreneurship. David learned to always create a new venture with
business model in order to sustain it in a long run.
“Now, I will always start a company with business model.”
“I now always prioritize financial for a sustainable growth. I have integrated revenue
model in my projects and it is working well.”
29
In addition, Anders and Fredrik are able to do so. Anders has changed his perspective working in
team. This eases up problems in group communication and collaboration for him.
“When I work with others, I see myself less I and more we.”
“I learned the importance of team. I listen to what others have to say and respect their
ideas”
Fredrik also turned the former competitors of his old company to be partners of his new company
when he decided to re-enter into the same business.
“Failure made me see things from different perspective; Business rivals can be our
strategic partners in this very niche market.”
On the other hand, Calle who did not apply any learned lessons actually made the same
mistake again in a similar situation in the respect of his previous failure that he described. At the
time of the interview being conducted, he is working on a project with a team that were formed
among friends due to the convenience and he was not even expecting to “pull it through
together”; however, he once again saw it as gaining experience.
“I did not expect the team to really pull it through in my current project but I didn't mind
I took it as a learning experience.”
30
DISCUSSION
The previous finding results are interpreted and discussed in this section. Then, the
observation and reflection are linked to theoretical insights within the aforementioned literature
review in order to answer the research questions.
FAILURE UPON ENTREPRENEURS’ EXPERIENCES
When being asked what failure is, each respondent expressed their opinions differently
from action-oriented notion like “quitting an entrepreneurial life” to abstract concept such as “the
fear that is needed to overcome” basing on the statements from David and Anders respectively.
However, the deeper investigation revealed that failures described by entrepreneurs are not the
same as failures they had actually experienced. When every respondent started to elaborate on
failures they had faced in their projects, the descriptions sometimes are dissimilar with the
definitions they previously provided. For instance, Calle responded that entrepreneurial failure is
“a lack of scalability” but his detailed answer suggested that the failure in his first
entrepreneurial project is “an incompatible founding team”. This conflict demonstrates that the
real failure entrepreneurs experienced can be differed from failure they had perceived.
With the regard to failing experiences each respondent described, failures reported by all
of them were connected to their goals. This can be clearly seen in the case of Anders. His goal is
to create a co-working space for social entrepreneurs and he said the failure occured when the
bad collaboration within his team made sponsors change their minds and no longer support
hosting that co-working area. The correlation between failures and goals is comparable to 31
findings by Ucbasaran et al.’s (2010) that failure is subjected to change by personal goals of
entrepreneurs. No matter what cause of failure is – whether it is a mistake like “starting a project
without a business model” in David’s case or a misfortune like “an unexpected divorce of
investor that made him disregard the project” in Beatrice’s case, failure occurred when the
entrepreneurs received negative outcomes from their entrepreneurial endeavor (Cannon &
Edmondson, 2001) and realized they could not achieve the goals so they decided to end such
initiatives (McGrath, 1999). This also aligns with our definition that entrepreneurial failure
happens when an entrepreneur is unable to accomplish the goals and discontinue the actions
pursuing them.
FROM LEARNING TO KNOWLEDGE
Although none of respondents would like to fail in their entrepreneurial projects, they
unfortunately did. In fact, some of them even anticipate and also prepare to learn from failure in
their business venture. One of the respondents described his failing experience as something that
he was “looking forward to” and another one expressed that he felt “challenge” and
“enthusiastic” because he saw the failure from the bright side that would lead him to better
outcomes in the end. According to Calle’s point of view, he stated “If you set the goals, even if
you fail along the way, you will start again but not at from the beginning. It helps to move
forward”. This is consistent with McGrath’s (1999) indication that failure is unavoidable but can
be deemed as practical learning opportunity.
During the learning process, all of respondents reflected from and coped terrible failing
experiences. Upon their reflections, they focused on what went wrong and how to overcome
undesirable consequences. The causes of failures attributed by the respondents can be classified
into three groups. First and foremost is dominant internal cause; Anders’ failure is put in this
group because he had reasoned it as “lack of experience” which then affected decisions from
external factor to “involve experts in the project“. The second type is dominant external reason
as for David listening to “old school” thinking that affected his decision, an internal factor, to not
implement a proper business model into his project; thereby, that venture failed financially. The
last type is that both internal and the external factors are the causes of failure but both of them
32
are unrelated to each other. This type can be seen in the case of Calle. His personal decision not
choosing a team that complimented each other was part of the fail but the external factor of the
suppliers not being consistent with quality was another unrelated cause. Both internal and
external reasons for their failures are comparable to Cardon et al.’s (2011) characterization of
causes of failure into mistakes and misfortunes. Internal factor can be deemed as mistake that
entrepreneurs should have been able to manage and manipulate while external factor can be
deemed as a misfortune that is beyond the control of the entrepreneurs. Their positive attitudes
toward failure mentioned above help them to be able to reflect on their deficiency and capable to
identify by themselves on what went wrong on their previous entrepreneurship. Learning through
failure reflections (Politis & Gabrielsson, 2007) and the ability to specify causes of failure make
entrepreneurs step closer to fail forward in their endeavor (Shepherd et al., 2009).
Every respondent did not only reflect on causes of failures but also on the consequences.
However, entrepreneurs must be able to cope with the aftermaths besides reflecting on them.
Otherwise, such consequences would obstruct entrepreneurs to move on either with their
entrepreneurial lives or back to employment field (Singh et al., 2007). The framework from
Singh et al.’s (2007) research is used categorizing consequences into economic, social,
psychological, and physiological aspects. Overall, the most crucial consequences of respondents’
failures lie within economic aspects with some effects toward their social lives and
psychological. However, none of them suffered terribly from those economic losses or put
themselves in any substantial personal debts from their venture failures. The respondents
describe their ventures to have “less potential” or “loss of investments” and the possibility to
face “difficult to move ahead”. Due to the fact that the size of business ventures of each
respondent is relatively small, the weight of economic loss is not as severe as the collapse of
tycoons. Moreover, none of respondent reported any signs of physiological effects from failures.
By analyzing respondents’ coping strategies in accordance to Drnovšek et al.’s (2010)
methods: problem-based coping strategy and emotion-based coping strategies, the results show
that respondents as in Singh et al.’s (2007) findings mostly dealt with problem-focused coping
strategies which deals with the financial aspects of the failure, such as “thinking of alternative
financial support” and “focusing on balancing quality and profits to improve quality” We also
found that experienced entrepreneurs tend to use problem-based coping strategies by effectively
addressing economic aspects which results in well being and positive venture performance.
33
Emotion coping examples was “learn to apologies” and “reflect and not overreact towards
failure”. Another interesting point is that none of respondents experienced the physiological
consequences of failure; this might also be a positive effect from the fact that all of respondents
were able to cope from the failure. Furthermore, their optimistic thoughts toward failure such as
“failure is just a part of my learning process” or “the side project that we could not carry out this
time” may be the reasons why all respondents easily cope with their failures as suggested by
Politis & Gabrielsson (2007) that positive attitudes would help entrepreneurs move forward.
Once entrepreneurs had reflected on their failures and coped with the hardships, they
were able to draw the lessons from that experience. The learned lessons they gained through the
learning process was as follows:
Anders – Communicating and collaborating within team
Beatrice – Preparing alternatives for every step in entrepreneurship
Calle – Forming a team from those who have complementary skills to each other
David – Incorporating business model when start a new
Erika – Taking time to analyze all options before making a decision
Fredrik – Turning indirect competitors into strategic partners
The above learning outcomes are sensible lessons each entrepreneur obtained directly by
reflecting and coping from failures; however, these lessons have not yet been applied at this
stage. In relation to Burgoyne and Hodgson’s (1983) framework, this indicates that every
respondent have reached level one of learning.
IMPLEMENTING LEARNING OUTCOMES IN SUBSEQUENT ENTREPRENEURSHIP
According to the previous section, it can be said that all of respondents learned from
failure and drawn beneficial lessons out of it. Nonetheless, Shepherd (2003) argued that the
learning is neither immediate nor automatic. The true learning from failure requires both
reflection and application (Shephard, 2003; Shepherd et al., 2009; Ucbasaran, 2011). The
researchers have to examine further if entrepreneurs actually implement such lessons in order to
answer the first and utmost research question, “Have the entrepreneurs been able to apply what
they learned from failure?” Even though all of respondent reflected on their failures, we noticed
34
that half of respondents did not apply their learning in new ventures even they all reported the
learning outcomes.
The following three entrepreneurs are those who did not apply what they learned from
previous failures to subsequent ventures. In fact, one of them even realized that he did not do so
during the interview when he was aware that he made the same mistake twice. Beatrice was “rely
only on one individual” to get her project funded; nevertheless, she is still reaching potential
investor one at a time. Calle “found himself in the same situation again” in building the founding
team that was not complementing each other due to the fact that he “did not know team well
when the business was started” and fell for the same pitfall twice. Even more, Calle seems to
carelessly ignore to apply the lesson he previously learned as he replied "I did not expect the
team to really pull it through in my current project” when he talked about his team in his present
project. Erika admitted that her personal traits are “hot-headed” and “thinking on her feet” that
usually causes her to “making decisions too fast”. Although she is aware of her flaws, it is very
difficult for her to apply changes in her personality instantly. In conclusion, all of them did not
implement the obtained knowledge into their subsequent entrepreneurship and sometimes made
similar decision they previously made in their current projects. Thereby, they stop their learning
at level one (Burgoyne & Hodgson, 1983) and clearly do not benefit from their past failures.
Nonetheless, the other three respondents who reflected upon their failures and took their
learned lessons into actions stated the positive effects upon the applications. Anders learned “not
to blame others” and “always listen to what others have to say”. He implemented these learning
outcomes by “using we instead of I and us instead of me” in which make him putting others over
himself resulting in better experience working with other people. David learned to “prioritize
financial” in his entrepreneurial projects; therefore, he later on ensures that he “always apply
business model” to generate financial incomes in order to scale and sustain every business he
created. Fredrik learned that “business rivals” can turn into valuable business partners; hence, he
partnered up with them when his family reopened a new company so they gain benefit from
growing and strengthening business network. The results of this findings showed that failure
could push the entrepreneurs forward if they reflect and apply lessons they have learned
(Shepherd, 2003; Shepherd, 2009; Shepherd et al., 2009); thus, knowledge implementation is the
key to lead entrepreneurs out of failure to success.
35
To have a closer look on this issue, every cause of failure identified by those
entrepreneurs who do not implement the learning outcomes is partially resulted from external
factors. As a consequence, such entrepreneurs do not take actions from their side to prevent the
repeating faults. Because of a lack of knowledge implementation, these entrepreneurs did not fail
forward from their mistakes (Cope & Watts, 2000; Shepherd, 2003). This result indicates that not
all of entrepreneurs actually apply learning outcomes although every one of them already
reflected on their past failures. It is also backed by Ucbasaran et al.’s (2010) statement that
individual who experience failure can process and learn from failure differently.
EXTENT OF LEARNING OUTCOME IMPLEMENTATION
After the researchers found out that only half of respondents indeed apply learning
outcomes in their subsequent entrepreneurship, we must investigate deeper “to which extent the
entrepreneurs have implemented their learning outcomes?” in order to answer the second
research question. For that reason, only the cases of Anders, David, and Fredrik are qualified for
discussion in this section. Their knowledge implementations are interpreted and measured in
comparison to learning characterization by Burgoyne and Hodgson (1983) as follow:
In the case of Fredrik, he “was looking at the bright side of what happened” and stopped
struggling in a niche market solely. He changed his business strategy by being partners with his
former “business rivals” increase both of their capabilities to capture the market share. In order
to do so, Fredrik shut down his old company “as soon as possible to work fully on new business
model” under a new company. His actions prove that Fredrik transferred what he learned to his
subsequent entrepreneurial endeavor by applying it as a new business model. As a result, his
knowledge implementation can be considered as a learning level two regarding to the framework
of Burgoyne and Hodgson (1983).
In the case of Anders and David, their lesson implementation is classified at level three of
learning (Burgoyne & Hodgson, 1983). This is because the two of them have learned crucial
lessons that cause vital impact on both personal and professional levels (Cope & Watts, 2000).
David learned that “the old-school belief” that social enterprise should not gain any profits is a
false belief and impractical. His perception toward social entrepreneurship was completely
reframed and he now realizes that every entrepreneurial project needs a business model in order
36
to sustain and grow. Because his understanding has changed and he integrated business model
into all of his current projects, his ventures are growing sustainably. Having discussed how
David benefits from his failure, Anders used the learning lessons to improve himself and his
projects as well. His attitudes toward teamwork were permanently disrupted; he sees himself
“less I and more we” when working in a group. Afterward, his successive works with colleagues
goes smoother because he opens his mind to listen to other people’s opinions and respect their
ideas.
There is another interesting point from this finding that is worth to point out. Beatrice and
Erika have over five years of entrepreneurial experience and have faced many failures yet they
still did not apply every learning lesson to their subsequent ventures whilst Anders and David
who have recently become entrepreneurs did. This observation can determine that the number of
year of experience in entrepreneurship and the number of failures entrepreneurs faced do not
have any effect to make entrepreneurs implement learning outcomes.
37
CONCLUSIONS AND IMPLICATIONS
Considering the experience of failure that each single entrepreneur expressed herein,
failure is diversely perceived with respect to distinct goals of each individual. This outcome is
similar to the definition of failure that it is subjectively the discontinuance of entrepreneur’s
goals (McGratch, 1999; Ucbasaran et al., 2010). In this study, every respondent was able to
identify factors that caused failure and elaborate on learning outcomes they gain through their
reflections and coping experiences. However, deeper investigations demonstrate findings that not
all of them actually implemented their learning outcomes. As mentioned at the beginning,
learning outcomes from failure would become useless if entrepreneurs do not actually apply
what they have learned through their practical experiences. Our research vividly shows that
failure alone would not automatically assist the entrepreneurs or cause positive effects. This also
complemented by Shepherd’s (2003) study that suggested entrepreneurs, who would learn from
business loss, must be able to identify the causes of failure, reflect on them, and implement the
extracted lessons in their next entrepreneurial actions. Only entrepreneurs who do so will truly
benefit from failure and fail forward. A lack of learning implementation could deplete the value
of high-priced lessons intrinsic in failing experience and jeopardize the opportunity to develop
both entrepreneurs and their ventures. However, there are various extents of lesson
implementation. Entrepreneurs may apply the learning outcomes specifically to certain projects
or implementing those lessons at personal level for their own improvements. This study also
highlights the consequences of failure and coping strategies in which mainly occurs to
economics aspects of entrepreneur lives comparing to social and psychological aspects. Within
38
the early stage of venture and small size of firm, the business loss does not leave any
physiological costs to any respondents. Another important implication from this study is that the
number of failures entrepreneurs have been through and the years of experience they have
worked in the field do not correlate with repeat entrepreneurs using this knowledge in subsequent
ventures. Because failure could be a double-edged sword that propels entrepreneurs from getting
back on their feet and succeed in their future entrepreneurial endeavors (Ucbasaran et al., 2013),
it is crucial to comprehend the phenomenon of entrepreneurial learning process and lessons
implementation to ensure that when entrepreneurs fail, they would be able to fail forward.
LIMITATIONS
The authors recognize there are limitations in this research; the most significant limitation
is how the participants identified failure. The definition used by the researchers is in accordance
with McGrath (1999) and Ucbasaran et al. (2010) that focus on the entrepreneurs’ personal
perception of the event of failure rather than venture failure. The research; therefore, does not
identify and categorize reasons for failure, as it would be if it were identified more commonly
with focus on bankruptcy and insolvency of a firm or a business (Shepherd, 2003; Zacharakis,
Meyer & DeCastro, 1999).
Second limitation was the method of sampling used in conducting this research because
convenient and purposive sampling method has its disadvantages for the result of this particular
study. One possible outcome is that the research has systematic bias (Mackey & Gass 2005),
which results in skewed results. Dörnyei (2007) Researchers have chosen participants to meet
certain practical criteria, likely to be biased and subjective of the researcher ensured balance of
group.
Another limitation was the difficulty of verifying entrepreneurs learning outcomes as it
was reported and told by entrepreneurs themselves which could allow recalling bias to arise from
the time gap from then and when the interview was conducted (Podsakoff & Organ, 1986).
However, researchers have taken in consideration that the researched entrepreneurs were
explaining and filtering everything through their own personal framework of beliefs and values.
This means that it is not believed by the authors that there are any absolute truths, but that reality
is subjective and that there are multiple points of view that can be understood by examining the
39
perceptions of the individuals. The researchers are also aware of the fact that participants’
backgrounds, opinions and beliefs influenced phenomenological standpoints. This effect were
limited through careful data preparation, coding, and interpretations, the results of this qualitative
analysis can therefore support the development of new theories, as well as validating existing
theories and provide descriptions of particular settings or phenomena (Weber, 1990)
Last but not least, the method of analysis in finding out which extent entrepreneurs
applied their learning outcomes can be prone to researcher bias. According to Schwandt (1994,
p. 18), “to prepare an interpretation is itself to construct a reading of these meanings; it is to offer
the enquirer’s construction of the constructions of the actors one studies”. This means that the
involvement of the researcher in the study shapes the knowledge resulted (Cassell & Symon,
2004), as the findings are based on their background, beliefs, values and personal backgrounds.
This limitation is addressed, according to Eisenhardt and Graebner (2007, pp. 30) through
“theoretical sampling of cases, interviews that limit informant bias, rich presentation of evidence,
and clear statement of theoretical arguments”.
Additionally, suggestion for further research is making a longitudinal study and includes
a larger sample group how entrepreneurs use what they have learned from failure and if there is
changes as they gain further experience. Another suggestion for further research would be to
research further into whether numbers of failures and years are insignificant in learning
outcomes on a larger scale to validate our research outcome.
40
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APPENDICES
Appendix A – Preliminary Interviewee Selection Questionnaire
1. Have you ever worked on any entrepreneurial projects and how long have you been an
entrepreneur?
2. Could you please provide more details on these entrepreneurial projects?
3. What are/is the project(s) that you are still working on?
4. Have you experienced failures from those inactive projects?
5. Did you learn any lessons from the failures?
6. Do the learned lessons benefit your current entrepreneurial project?
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Appendix B - Interview Questions
The purpose of this research is exploring the link between coping and learning in
entrepreneurial failure. We will explore what success and what failure is for entrepreneurs? How
they cope after failing in their venture creation? Did their previous failures contribute to any
learned lessons that can be implemented in their current entrepreneurship and to what extent?
1. Background or History
1.1 Can you tell me a little about yourself and your background in entrepreneurship?
1.2 Which ventures or projects have you started or worked on?
1.3 How long have you been an entrepreneur?
1.4 How much time did you spend on the project that failed, please think of one that particularly
affected your life?
2. Entrepreneurship
2.1.What does entrepreneurship mean to you?
2.2 What were the goals of your entrepreneurial project?
2.3 What does success mean to you in terms of entrepreneurship?
2.4 What does failure mean to you in terms of entrepreneurship?
3. Failure in Entrepreneurship
3.1 Can you describe how your project failed?
3.2 Could you please elaborate on the factors that caused the failure?
a) Internal factors
b) External factors
3.3 How did that experience make you feel in the aspects of?
a) Economic
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b) Social life
c) Psychological
d) Physiological
4. Coping with failure
4.1 From the four aspects above, how did you cope from that experience?
a) Economic
b) Social life
c) Psychological
d) Physiological
4.2 Do you think that you have benefited from your failures?
4.3 Apart from the effects toward the project, has failure changed you personally?
If yes, how has it changed you?
5. Present entrepreneurial project
5.1 Through previous entrepreneurial experience, how do you see yourself today as an
entrepreneur?
5.2 Despite the lessons learned, do you think there is a possibility to fail on the same mistakes
again?
5.3 Are any of these failure aspects beyond your control?
a) Economic
b) Social life
c) Psychological
d) Physiological
6. Future outlooks
6.1 Reflecting from your past entrepreneurial experience, what are the learning outcomes that
you can use as stepping stones to success for your next venture.
6.2 Have you been able to implement any of those lessons in your current entrepreneurial
project?
7. Suggestion
Is there anything else you would like to add?
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