Copyright © eContent Management Pty Ltd. Journal of Management & Organization (2007) 13: 331–344.

Coping with
entrepreneurial failure
S MITA S INGH
University of Waikato Management School, Hamilton, New Zealand

PATRICIA CORNER
Faculty of Business, Auckland University of Technology, Auckland, New Zealand

K ATHRY N PAV L O V I C H
University of Waikato Management School, Hamilton, New Zealand

ABSTRACT
Research on entrepreneurship focuses predominantly on success which ignores the high failure rate
of new ventures and precludes a holistic view of the entrepreneurial process. The current study
addresses failure by asking three research questions: how do entrepreneurs experience failure, how
do they cope with it, and what do they learn from it? Rich interview data is analyzed using multi-
ple frameworks from the literature. Findings suggest that more coping and learning occurs in the
economic aspect of failed entrepreneurs’ lives in comparison to the social, psychological and physio-
logical aspects. Findings also provide a proposition for testing in future research: Type of coping
engaged in by failing entrepreneurs is related to the kind of learning experienced through failure.

Keywords: entrepreneurial failure; coping; learning

A cademic research into the field of entrepre-

neurship has grown enormously in the last
two decades. Reported findings provide many
insights but they focus predominantly on entre-
preneurial success (Sarasvathy 2004, for exam-
ple), adequate capitalization (Choo & Wong
2006) and entrepreneurs’ attitude to risk (Green-
bank 2006). This focus is surprising given the
practical reality of high failure rates of new ven-
tures. In 2001, 12,457 US businesses ceased
operations and had their assets liquidated with
the proceeds paid to creditors. If we extrapolate
these US statistics worldwide it becomes clear
that a staggering number of businesses are failing
worldwide each year. The focus on success is also
surprising given theoretical developments in the
field of entrepreneurship. For example, scholars
offer the ‘creation’ view of entrepreneurship
(Alvarez & Barney 2005) which describes oppor-
tunity identification as an emergent process
wherein commercially viable opportunities take
shape through a trial and error learning process.
Learning from failure, or what doesn’t work with
an initially envisioned opportunity, is a key fea-
ture of entrepreneurial process in this creation
view. As such, failure of particular opportunities
may be important contributors to eventual entre-
preneurial success, both at micro (individual) and
macro (the economy) levels of analysis (Saras-
vathy 2004).
However, research on entrepreneurial failure to
date is dwarfed by the amount of research on

Volume 13, Issue 4, November 2007 J O U R N A L O F M A N A G E M E N T & O R G A N I Z AT I O N 331

 Smita Singh, Patricia Corner and Kathryn Pavlovich
entrepreneurial success. Academics thus know
very little about entrepreneurial failure or the
ability of the entrepreneur to cope and learn from
failure (Shepherd 2003). This remains the case
despite acknowledgement that failure may pro-
vide key learning that improves an entrepreneur’s
probabilities of success in subsequent entrepre-
neurial initiatives (Shepherd 2003; Minniti &
Bygrave 2001).
The purpose of the current study is to begin to
explore entrepreneurial failure. The lack of
knowledge on this topic led us to pursue a broad
research question: How do entrepreneurs experi-
ence and cope with failure? Following on from
this broad question, we examine how coping
mechanisms influence entrepreneurs’ learning
from failure. It appears important to study the
topic of coping with entrepreneurial failure
because Shepherd (2003) suggests that entrepre-
neurs experience grief from business failure analo-
gous to that experienced when a loved one dies.
Such grief likely triggers a negative emotional
response that interferes with an entrepreneur’s
learning ability (Shepherd 2003). A lack of learn-
ing could jeopardize the trial and error entrepre-
neurial opportunity development process
conjectured by the creation view of entrepreneur-
ship. A study of coping with entrepreneurial fail-
ure seems an important contribution toward
understanding how failure may contribute to
future entrepreneurial success, thereby highlight-
ing the benefits of a more holistic approach to
entrepreneurship scholarship currently advocated
in the literature (McGrath 1999; Minniti &
Bygrave 2001; Sarasvathy 2004; Shepherd 2003).
LITERATURE REVIEW
F a i l u re D e f i n e d
What does entrepreneurial failure mean? Not sur-
prisingly, researchers have attached different
meanings to the word failure in their studies. A
useful definition is that of bankruptcy and insol-
vency in Zacharakis, Meyer and DeCastro
(1999). Such a definition is convenient for opera-
332 J O U R N A L O F M A N A G E M E N T & O R G A N I Z AT I O N
tionalizing failure and for forming samples. How-
ever, failure often is broader than mere bankrupt-
cy in that seemingly minor interpersonal conflicts
among new venture participants and personal
limitations of the entrepreneur can create serious
issues for a venture that ultimately results in busi-
ness cessation. McGrath thus broadens the defini-
tion of failure to be ‘the termination of an
initiative that has fallen short of its goals’ (1999:
14). Similarly Cannon and Edmondson concep-
tualize failure as ‘deviation from expected and
desired results’ (2001: 162).
Shepherd provides yet another definition of
entrepreneurial failure. He states that failure
‘occurs when a fall in revenues and/or a rise in
expenses are of such a 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’ (2003: 318). Shepherd’s inclu-
sion of the term ‘magnitude’ clarifies his view that
failure is a mishap for a firm with major conse-
quences for the business.
Finally, Bruno, Mcquarrie and Torgrimson
(1992) define failure as business discontinuance,
which could be due to various reasons including
legal problems, partnership dispute, death or sim-
ply a shift in interest to carry on with the same
business. In this paper, we acknowledge the above
views of failure but use as an operative definition
of entrepreneurial failure as ‘business discontinu-
ance’, consistent with Bruno et al. (1992). We do
this to clarify the point of failure and also to keep
the notion of failure broad enough that it com-
plements the qualitative, exploratory purpose of
the study and is in keeping with a holistic view of
entrepreneurship. Our definition encompasses
not only economic factors such as bankruptcy
and insolvency but also other factors such as
intractable disputes and legal problems and per-
sonal issues of the entrepreneur. Importantly, this
study’s definition of business discontinuance does
not include less serious reasons for business dis-
continuance such as shift in personal interests of
the entrepreneur.
Volume 13, Issue 4, November 2007

Empirical Findings
Although research exploring entrepreneurial suc-
cess dwarfs that investigating failure, the litera-
ture does include two studies of failure. The first
was a 20 year study of 250 technology-based
business ventures begun in the 1960s in Silicon
Valley, California. These scholars (Bruno et al.
1992) examined failure as well as success. Find-
ings indicated that by 1988, 50% of the firms in
the sample had failed (discontinued), 32% had
merged or had been acquired and only 18%
continued to survive as independent businesses.
Results further showed the reasons entrepre-
neurs gave for the discontinuance of their busi-
nesses. Reasons included product or market
problems, financial difficulties, and managerial
or key employee problems. To further clarify, the
lead up to financial difficulties often involved
the deterioration of relationships with venture
capitalists and managerial problems. Specifically,
the problem of an ineffective management team
was cited as a cause of failure by 90% of the
respondents.
The second study was done by Zacharakis et
al. (1999) and examined entrepreneurial failure
only. These researchers were interested in com-
paring the explanations for failure given by entre-
preneurs and venture capitalists. They defined
entrepreneurial venture failure as bankruptcy, and
examined eight case studies of failed, high tech-
nology manufacturing firms. In six cases failure
had already occurred and the other two cases
involved companies that were on the verge of fail-
ure. Two key findings were reported. First, entre-
preneurs and venture capitalists had different
perceptions about why the entrepreneurs’ ven-
tures failed. Fifty eight percent of entrepreneurs
attributed the failure of their company to internal
factors such as poor management strategy and
lack of capitalization. In fact, the most common
internal factor cited by entrepreneurs was poor
management strategy. However, the venture capi-
talists (75%) attributed failure of the same com-
panies to external factors, factors outside the
control of entrepreneurs. For example, venture
Volume 13, Issue 4, November 2007 J O U R N A L O F M A N A G E M E N T & O R G A N I Z AT I O N
Coping with entrepreneurial failure
capitalists tended to see strong competition, slow
market growth, and small market size as causes of
failure.
In sum, studies by both Bruno et al. (1992)
and Zacharakis et al. (1999) emphasized ‘causes’
of failure. The present study seeks to extend their
research by examining what happens after the
firm fails. Stated differently, how does business
discontinuance affect the entrepreneur and his or
her learning about venture start-ups? In particu-
lar, how do entrepreneurs cope with the failure
experience and how does coping affect learning?
Again, we believe these research questions are
important to address in entrepreneurship research
because entrepreneurs’ coping strategies and
resulting learning may well improve the probabil-
ity of success in a future entrepreneurial endeav-
our (Minniti & Bygrave 2001; Cannon &
Edmondson 2001).
COPING WITH FAILURE
Concept and Framework
The concept of coping has been important in
psychology since the 1940s. In particular, the
psychoanalytical tradition within psychology
views coping as realistic and flexible thoughts and
acts that solve problems and thereby reduce stress
(Lazarus & Folkman 1984). This definition of
coping focussed on cognition or individuals’ per-
ceptions and thoughts about their relationships
with the environment. Lazarus and Folkman
extend this psychoanalytical view of coping by
defining it as ‘constantly changing cognitive and
behavioural efforts to manage specific external
and/or internal demands that are appraised as
taxing or exceeding the resources of the person’
(1984: 141). They claim that coping is a ‘shifting’
process, and the coping strategies employed by
people depend on the status of the changes in the
relationship between a person and the environ-
ment. We thus apply their concept of coping to
the specific topic of entrepreneurial failure. Cop-
ing with entrepreneurial failure is formally
defined then as cognitive and behavioural efforts
333
 Smita Singh, Patricia Corner and Kathryn Pavlovich
to manage the taxing demands posed by venture
denouement and discontinuance.
There are two major kinds of coping; prob-
lem-focussed and emotion-focussed coping.
Problem-focussed coping is managing, or chang-
ing a problem causing distress while emotion-
focussed coping regulates emotional reactions to
a problem. This nomenclature of problem-
focussed and emotion focussed coping proved to
be a good place to start categorizing individual’s
coping behaviour even though some researchers
have criticised these two categories as an oversim-
plification of coping strategies (Folkman et al.
2004). Other scholars propose additional cate-
gories of coping strategies such as meaning-
focused coping. Meaning-focused coping is when
a person under stress attributes the stressful situa-
tion to something that will bring enhanced
meaning to the person’s life over the long run.
Still others have suggested adding a specific social
factor category to coping types wherein the per-
son perceiving stress taps into social support to
resolve problems or to minimize the emotional
toll stress is having on them. Empirical studies, to
date, have failed to provide a definitive typology
of coping strategies across all kinds of stressful
events (Folkman et al. 2004).
We thus applied the classic categories of prob-
lem focused and emotion focused coping in the
current study given that there is reasonable con-
sensus around this being a good place to start.
The qualitative, exploratory nature of the study
allows us to expand these two classic categories
should the data suggest doing so.
The wider management research also provides
a framework for investigating individuals’ coping
with significant loss that is useful for guiding our
qualitative data collection. In particular, research
on involuntary job loss shows that coping is a
dynamic process not a static event that is best
explored through four broad aspects of a person’s
life affected by such a loss. These aspects are eco-
nomic, psychological, physiological, and social
(Latack et al. 1995). The economic aspect
involves financial strain due to lack of income
334 J O U R N A L O F M A N A G E M E N T & O R G A N I Z AT I O N
(Brief et al.1995), and in the case of business dis-
continuance may involve personal debts incurred
to fund the failed business. Psychological aspects
include a spectrum of issues ranging from
reduced subjective well-being (Brenner & Bartell
1983; Kinicki 1985) to increased occurrence of
serious psychiatric illness (Stafford, Jackson &
Banks 1980) including severe depression (Hamil-
ton et al. 1993) and increased rates of suicide
(Cobb & Kasl 1977). Documented physiological
factors include increased anxiety and hyperten-
sion in the form of elevated blood pressure (Lat-
ack et al. 1995). Social aspects typically involve
loss of personal status and identity and alienation
and restriction in social contacts (Payne & Hart-
ley 1987). These aspects will be examined in the
following study.
R ESEARCH METHOD
Study Design and Data Collection
The current study uses an exploratory, qualitative
research design. Such a design is appropriate
because the broad research question is consistent
with a qualitative design and the dearth of previ-
ous research supports an exploratory approach
from which we uncover deep insights (Hussey &
Hussey 1997). Five case studies were developed
through data collection. Predominantly, data
were collected using semi-structured interviews
of entrepreneurs who had experienced business
discontinuance. Interview questions began with a
‘grand tour’ question which is an open-ended
question designed to focus respondents on the
topic and give them the chance to tell their story
with minimal interruption by the researcher
(Morse & Richards 2002). Additionally, further
topic guide questions were prepared and used if
further probing was needed on issues that were
important to the research question. Interviews
were conducted during the last half of 2005 and
lasted for approximately one and half hours.
Interviews were transcribed and the resulting
data were cross-checked with secondary sources
when available. Transcripts were analysed with
Volume 13, Issue 4, November 2007

the purpose of developing theory about the link
between coping and learning in entrepreneurial
failure.
Sample
Respondents were entrepreneurs who had experi-
enced a business venture failure and were pre-
pared to share their experiences. A snowballing
technique (Hussey & Hussey 1997) was used
among friends, business acquaintances, and
respondents to find suitable respondents. Data
gathered from respondents constituted the five
cases of business discontinuance described in
Table 1. (It is important to note that ethical
approval for interviewing failed entrepreneurs was
secured from the first author’s university prior to
data collection.) Five cases are within Eisen-
hardt’s (1989) criteria (4 to 10 cases) for induc-
tive patterns to emerge. These five case studies
involved entrepreneurial ventures based in Auck-
land, New Zealand.
Data Analysis
Data were analyzed using two broad frameworks.
Using multiple frameworks for analysis helps
TA B L E 1 : D E S C R I P T I O N OF F I V E C A S E S I N C L U D E D I N S T U D Y
Cases Respondent Age / Sex
A J 57 / male
B L 44 / female NZ European
(part Maori)
C D1 Early forties NZ European
/ female
D B 42 / male
E D2 45 / male
Volume 13, Issue 4, November 2007 J O U R N A L O F M A N A G E M E N T & O R G A N I Z AT I O N
Coping with entrepreneurial failure
researchers avoid reaching premature or false con-
clusions as a result of inherent cognitive biases
(Eisenhardt 1989). The first framework was
taken from the coping with involuntary job loss
literature which holds that there are four aspects
that need examining to fully comprehend how a
person copes with a major loss: economic, social,
psychological, and physiological (Latack et al.
1995). We applied this framework in a first step
of analysis to produce a thorough description of
how entrepreneurial failure was experienced in
the five cases of venture failure. Such a descrip-
tion facilitates generalization and abstraction
from field data (Morse & Richards 2002). For
the second step we applied a framework original-
ly suggested by Glasser and Strauss (1967) as
appropriate for theory development. Figure 1
illustrates this framework which facilitates the
categorization of qualitative data, an important
first step in building theory from data (Morse &
Richards 2002). The framework was ultimately
used to generate testable hypotheses for future
research.
Venture
Ethnicity Entrepreneurial venture failure experience duration
NZ European Language school run by J lasted for two Two years
(partly Irish) years and then was closed down due to
f i na n c i a l l os s ( de bt ac cumul at i on)
Café run by L and her husband, which was One year
ultimately sold off due to financial loss
(debt accumulation).
Kitchen cabinet making business in Seven and
partnership with boyfriend, had to close it a half
down because of relationship problems which years
resulted in financial loss (debt accumulation).
Originally from Bed and breakfast business in partnership Two
Zimbabwe, now with two friends, had to close it down months
settled in NZ. because of legal problems within two months.
European Recruitment business in partnership with one Two
(British) settled friend, had to close it down because of years
in NZ problems with the business partner.
335
 Smita Singh, Patricia Corner and Kathryn Pavlovich

CONTEXT
Economic
climate, Industry
characteristics

CAUSAL PHENOMENON COPING CONSEQUENCE

CONDITIONS STRATEGIES
• Experience of • Paradoxes
Antecedents failure • Keeping from • Surviving
• Feelings being over- • Coping
associated with whelmed by • Living
failure threatening or • Healing
dangerous • Empowerment
feelings • Hope

INTERVENING
CONDITIONS
• Cultural values
• Resources
• Rewards

FIGURE 1 : F RAMEWORK USED FOR D ATA A N A LY S I S

loss on the lives of the founding entrepreneurs.

RESULTS
S t e p 1 : F a i l u re D e s c r i b e d
Step 1 findings are reported in Table 2. The
columns in the table represent the four aspects
of an entrepreneur’s life that could potentially
be influenced by the loss of a business venture:
economic, social, psychological, and physiologi-
cal. The table provides examples of how all four
life aspects were affected by venture loss, there-
by describing the comprehensive effect of this
The effects of the economic aspect on entrepre-
neurs’ lives are noted in Table 2 which shows
how four out of five founders dealt with unem-
ployment following the demise of their busi-
nesses. Entrepreneurs reported substantive
social impact from venture loss in that three of
their five marriages broke up within a few
months of the business failure. Also, two of the
entrepreneurs reported a social distance from
friends and from family members due to feel-
ings of embarrassment or guilt associated with

336 J O U R N A L O F M A N A G E M E N T & O R G A N I Z AT I O N Volume 13, Issue 4, November 2007


the venture failure. The findings reported in
Table 2 regarding the impact on the psychologi-
cal aspects of entrepreneurs’ lives are particular-
ly noteworthy for their link to the current
literature. All five entrepreneurs reported feel-
ing grief over the loss of their business. Grief
was accompanied with depression for two entre-
preneurs while the other three entrepreneurs
told of their anxiety, panic attacks, phobias, and
anger. Such findings corroborate Shepherd’s
(2003) hypothesis that there is significant grief
to be dealt with when an entrepreneur loses his
or her business. A grief component to entrepre-
neurial failure has been hypothesized but this
study provides empirical evidence supporting
that hypothesis. Even though these findings are
preliminary and exploratory they are important
because grief can be an impediment to learning
from entrepreneurial failure (Shepherd 2003;
2004).
Finally, entrepreneurs described physiological
effects due to venture failure. These ranged from
hospitalization to insomnia and weight loss (see
Table 2). Such physiological effects due to loss are
similar to those reported by individuals experi-
encing other kinds of major loss such as involun-
tary job loss or loss of a loved one (see Folkman
et al. 2004).
Taken as a whole, the findings in Table 2
suggest that there is much more to be coped
with when faced with venture failure than just
the economic aspects of that failure. This is
consistent with Shepherd’s (2004) suggestion
that venture loss may affect the psychological
and other aspects of an entrepreneur’s life.
Shepherd is concerned that these other aspects,
such as psychological aspects are likely to influ-
ence an entrepreneur’s learning from failure
and thus must be examined in order to under-
stand the complete entrepreneurial process
(Shepherd 2004). Entrepreneurial business
venture failure is a life altering event that cre-
ates considerable stress for the entrepreneur.
Future research could examine where this life
event falls on the scale of stressful life events
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Coping with entrepreneurial failure
that include bereavement and divorce to better
understand: 1) the magnitude of stress created
by failure; and 2) the likely amount of support
required to help entrepreneurs deal with such
stress in a way that may facilitate learning.
Results reported in Table 2 also indicate that
other highly stressful life events such as divorce
(see cases A, B and C in table) accompanied
entrepreneurial failure in the present study.
Future research could explore the effects that
ensue from the simultaneous occurrence of
entrepreneurial failure and another major life
altering events.
S t e p 2 : F i g u re 1 A p p l i e d
The analytical categories depicted in Figure 1
were used to further interpret the data in the sec-
ond step of analysis. We completed a table out-
lining the major themes that surfaced in each
one of the categories. These themes are not
included in the current paper due to space limi-
tations but are available upon request from the
first author. The following sub-sections report
analyses that directly pertain to the research
questions forwarded in the present study: how
was entrepreneurial failure experienced; what
coping strategies were used; and how did coping
influence learning from failure?
P h e n o m e n o n : E x p e r i e n c e o f f a i l u re
The phenomenon category depicted in Figure 1
is the main event that is being investigated: that
of how entrepreneurs experienced failure
(Creswell 1998). Table 3 extends these results by
reporting direct quotes illustrating how each of
the four aspects of entrepreneurs’ lives were
affected by business discontinuance.
Coping strategies
The coping strategies category from Figure 1 is
reported in some depth in this article because
one of the guiding research questions was
about this issue of coping. We thus present and
discuss two tables of findings on this topic of
coping strategies. Table 4 presents results
337
 Smita Singh, Patricia Corner and Kathryn Pavlovich

TA B L E 2 : F O U R A S P E C T S OF LIFE AFFECTED BY E N T R E P R E N E U R I A L FA I L U R E
Case Economic Social Psychological Physiological

A Forced to give up Distanced himself from Depression Panic attacks

assets and property friends because Despair
Unemployed after embarrassed Guilt toward mother
venture failure Entrepreneur’s Panic
(no income) marriage collapsed Grief
B Unemployed after Marriage ended in Grief Loss of weight
venture failure middle of venture Burnt out
(no income) failure Exhaustion
C Creditors calling Dissolution of marriage Grief Entrepreneur collapsed
entrepreneur directly Loss of friends and status Depression and hospitalized in
for money Anger intensive care unit due
Unemployed after Denial (of to low pulse, abnormal
venture failure responsibility for breathing, bronchial
(no income) venture failure) pneumonia
Anxiety and fear
D Faced extreme Lost respect of friends Grief
difficulties getting Supported others whose Developed phobia
employment post failure business was failing and of building elevators
(no income) did not feel he could ask because it triggered
for support for his failure memories of being
in a trapped helpless
situation like
business failure
E Employed post Grief Sleeplessness due to
venture failure Frustration anxiety about future
(generated income)

TA B L E 3 : P H E N O M E N O N : E N T R E P R E N E U R I A L V E N T U R E FA I L U R E – THEMES AND QUOTES B Y ASPECT AFFECTED

Aspects of
F a i l u re E m e rged Theme Suppor ting Quotes

Economic Financial Pressures ‘The hard part was I had spent a fortune on renovating the
building and I lost that.’ (Case A)
‘Bills started coming in….all the creditors were calling me
personally’ (Case C)
‘I faced extreme difficulties in getting employment after the
business closed and it is very hard to make ends meet when you
are surviving on a minimal salary’ (Case D)
Social Distancing from ‘I used to communicate with my mother a lot but I haven’t phoned
family and friends her for two years….I have distanced myself from my friends’ (Case A)
Psychological Grief ‘I think it is like grief…you have to go through all the screaming
and wailing and crying and then you come out of that and feel you
have dealt with it’ (Case A)
Physiological Deteriorating health ‘I collapsed and ended up in the hospital…I would become very ill
while the business was failing’ (Case C)

regarding problem-focussed coping used by Table 5 reports finding regarding entrepreneurs

respondents to cope with venture failure and emotion-focused coping strategies.

338 J O U R N A L O F M A N A G E M E N T & O R G A N I Z AT I O N Volume 13, Issue 4, November 2007


Problem-focused coping mainly centered on
the economic aspects of life that entrepreneurs
faced as their businesses failed (see Table 4). In
particular, the two most pressing economic prob-
lems in the current study were lack of income
and financial pressures due to debts. Interviewees
almost universally described networking to
secure a job or prospect for a new entrepreneurial
opportunity (see first row of Table 4). This net-
working is similar to that done by individuals
facing involuntary job loss (Leana & Feldman
1995; Folkman et al.1986) and reinforces the
idea that the loss experienced due to venture fail-
ure is analogous in some ways to involuntary job
loss. Additional research is needed to further
explore other ways in which venture loss and job
loss are similar.
To deal with debt, entrepreneurs engaged in a
variety of problem-focused coping strategies that
included taking legal action to be released from
debt, borrowing money from family, and selling
assets to get relief from debt (see Table 4).
Beyond the problems of debt and lack of income,
the entrepreneurs included in the present study
developed few problem-focussed coping strategies
TA B L E 4 : P R O B L E M -F O C U S S E D CO P I N G S T R AT E G I E S
Economic Problem Coping Strategies
Lack of income Example 1: Networked
(Unemployment) with and got work to do
from a contact at former
workplace (Case D)
Example 2 : Networked
looking for new
entrepreneurial
opportunity (Case A)
Example 3: Took a job
pumping gas
Financial pressures Example 1 : Sold assets
such as debts to pay debts (Case C)
Example 2: Borrowed
money from family (Case A) (dollars) from my brother-in-law to pay creditors.’ (Case A)
Example 3: Took legal
action to recover funds
(Case A)
Volume 13, Issue 4, November 2007 J O U R N A L O F M A N A G E M E N T & O R G A N I Z AT I O N
Coping with entrepreneurial failure
to address the three other aspects of their lives
affected by failure, namely; social, psychological,
and physiological. The exception to this was one
instance where the entrepreneur engaged in prob-
lem-focused coping to address a physiological
aspect of her life. Specifically, she purchased and
used healing equipment that she became familiar
with after the venture failed. The following quote
illustrates the strategy.
I bought my set up from the clinic and the lights
that I use personally for healing are used all over
the world and Europe. This [new job] is a job
that I absolutely love and adore and the glyconu-
trient business that I am also doing goes hand in
hand with it. (Case B)
Beyond this one exception, problem-focused
coping did not appear to be applied to the
non-economic aspects of entrepreneurs’ lives.
An example from the social aspect of entrepre-
neurs’ lives can be seen in that they became dis-
tanced from family and friends (see Table 2)
but did not join new clubs or participate in
social support groups to address this social dis-
tance. Similarly, practical problem-focussed
FOR E CONOMIC P R O B L E M S
Suppor t i n g Q u o t e
Example 1 : ‘It was someone at work…I approached him….
he started giving me little bits to do, then I got more work,
and eventually we became business partners. I kept going
because the key to survival is to keep going, keep meeting
people, and keep your social connections going.’ (Case D)
Example 2: ‘Last year I was in China…I got so many contacts
in China…I spent 4 weeks visiting factories and looking for
my next opportunity.’ (Case A)
Example 3: ‘I am unemployable. I can only do waitressing or
something that doesn’t require a credit check so I pumped
gas for a while.’ (Case C)
Example 1: ‘I approached some friends and sold them my
house for the price of the mortgage to get rid of that debt.’
(Case C)
Example 2: ‘I borrowed a hundred and twenty thousand
Example 3: ‘I took legal action against XYZ and I am still in a
battle with them.’ (Case A)
339
 Smita Singh, Patricia Corner and Kathryn Pavlovich
coping did not appear to be applied to the rea-
sonably severe psychological aspects identified
in the case studies. Strategies such as seeing a
counsellor have been used by others facing loss
in order to deal with psychological aspects of
loss. Similarly, strategies such as a formal exer-
cise program or relaxation techniques have
been used to deal with the physiological aspects
of job loss or death of a loved one but were not
employed by the entrepreneurs in this current
study.
The emotion-focussed coping results present-
ed in Table 5 reflect the fact that the bulk of
emotion-focused coping was aimed at the psy-
chological aspects of venture failure. These psy-
chological aspects included grief, guilt,
depression/despair, anger, and frustration (see
first column of Table 5) and are supported by
quotes from respondents. The first thing to
note is that respondents indicated that they did
not engage in coping strategies to deal with two
of the reported psychological aspects of failure,
namely, grief and frustration. This appears to
be an important finding given Shepherd’s
(2003) hypothesis that unaddressed grief
inhibits learning from business failure. More-
over, inhibited learning due to grief would shut
down the trial and error process of opportunity
development described in the creation model of
entrepreneurship (Alvarez & Barney 2005).
Future research is needed to see the extent to
which current exploratory findings of not cop-
ing with grief generalize across entrepreneurs
experiencing failure.
The second thing to note from Table 5 is that
the limited emotion-focussed coping strategies
that the entrepreneurs report using are consid-
ered reality-distorting and self-deception by cop-
ing researchers. For example, entrepreneurs in
the current study used distraction/ avoidance
behavior (example 2 in ‘guilt’ row of table);
denial strategies (example 1 in ‘guilt’ row of
table); and venting (example 1 of ‘Anger’ row of
table). Such strategies are a common way in
which people deal with the stress associated with
340 J O U R N A L O F M A N A G E M E N T & O R G A N I Z AT I O N
events, in this case a business failure (Lazurus &
Folkman 1984). The third thing to note is that
entrepreneurs reported three types of emotion-
focussed coping that are consistent with Shep-
herd’s (2003) restoration approach to dealing
with loss: positive imaging, personal re-examina-
tion, and reframing. A restoration approach
involves some avoidance of the loss and proac-
tiveness toward secondary sources of stress arising
from the loss of the business. Avoidance can be
in the form of avoiding discussions of the failed
business but reorganizing life to cope without the
business. Any behaviour such as listing learned
skills from the entrepreneurial experience on a
job application can be consistent with the
restoration orientation discussed by Shepherd.
Lear ning outcomes
The outcome category from Figure 1 is focused
on learning from venture failure in the current
study, given the questions guiding the research.
Table 6 reports on what learning took place in
each one of the aspects of entrepreneurs’ lives
potentially affected by venture loss: economic,
psychological, social, and physiological. One of
the most striking findings is the richness of
learning reported by entrepreneurs in the psy-
chological and social aspects of their lives. For
example, respondents reported being more real-
istic about their own personalities and skills
and the extent to which these traits were suit-
able for starting up a new venture. We had
expected the richness of psychological learning
reported by respondents given the extensive
coping strategies available to deal with psycho-
logical issues. However, we were surprised by
the extensive amount of social learning report-
ed by entrepreneurs in the study because they
had not identified coping strategies designed to
deal with the social aspect of venture loss. In
considering the results in Table 6, we were sur-
prised that entrepreneurs did not learn more
about the physiological aspect of loss and how
to deal with it. Only one entrepreneur learned
the importance of managing the physical
Volume 13, Issue 4, November 2007
 Coping with entrepreneurial failure

TA B L E 5 : E M O T I O N -F O C U S S E D CO P I N G S T R AT E G I E S FOR P SYCHOLOGICAL A SPECTS OF ENTREPRENEURIAL

FA I L U R E

Psychological
Aspects Coping Strategies Suppor t i n g Q u o t e

Grief Respondents did not have ‘I think it is grief and you have to go through all the screaming
coping strategies here. and wailing and crying and then you come out of it feeling like
you dealt with it. I haven’t dealt with it.’ (Case A)
Guilt Example 1: Other-Denial Example 1: ‘It took me five years not to try to dress it up as some
of responsibility for failure kind of moderate success….I was not honest with anybody….I
with family and friends. would selectively talk to different people about things.’ (Case E)
(Case E)
Example 2: Distraction Example 2: ‘I avoid facing reality… I try to keep my brain as numb
from situation. (Case A) as possible… I live in a fantasy world… I don’t want to admit that
this is all over because may be I’ll reach a point where suddenly I
will just sit in the corner and scream and hit my head against the
wall…I like betting on horses it’s a distraction… I go on drinking.’
(Case A)
Depression/ Example 1: Positive Example 1: ‘I always have this image of a phoenix arising from
Despair Imaging the ashes … I am still alive you know… I started again re-inventing
myself I felt like a sixteen year old starting all over again.’ (Case C)
Example 2: Personal Example 2: ‘It (venture failure) forced me to look at myself…where
Re-examination my skills were and what my interests were and then eventually I
got into partnership with another guy and we set up a legal
practice firm after that and that business was successful.’ (Case D)
Example 3: Reframing Example 3: ‘I began to think of it (the failure) as a challenge….
failure something to get through and learn from.’ (Case B)
Anger Example 1: Venting Example 1: ‘I would swear at him (former romantic and business
(Case C) partner) on the phone I’d say look at what you have left me….
how could you do this to me. I was so angry.’ (Case C)
Frustration Respondents did not have ‘I suppose it was more the frustration with myself for not pushing
coping strategies here. the business to the level I had dreamed of and I still have not
coped with this.’ (Case E)

symptoms of stress associated with starting up
a business. However, we caution that these
results are exploratory and further research is
needed to assess the extent to which the learn-
ing reported by failed entrepreneurs is actually
carried over into new ventures. For example,
the entrepreneur in Case A claims to have
learned that his personality is not a good match
for starting a business (see Table 6) and yet he
expressed interest in forming another venture.
D ISCUSSION AND PROPOSITIONS
The relationship between coping and learning
begins to take shape as we consider the results
across Tables 4, 5 and 6. With respect to prob-
lem-focussed coping, we see a link between this
kind of coping and the learning items reported in
Table 6. Specifically, we see a relationship
between the economic learning items (column 2,
Table 6) and the problem-focussed strategies
identified in the five cases. Much of the ‘econom-
ic’ learning that entrepreneurs described centered
on money issues such as where funding was com-
ing from for any new venture and exercising wise
money management once the venture was up and
running. We see the problem-focussed strategies
reported in Table 4 as being centered on finance
because these strategies were all about generating
income through securing a new job or taking
action to reduce debts accumulated by the failed
business. We thus suggest the following proposi-
tions for further research.

Volume 13, Issue 4, November 2007 J O U R N A L O F M A N A G E M E N T & O R G A N I Z AT I O N 341

 Smita Singh, Patricia Corner and Kathryn Pavlovich

TA B L E 6 : L E A R N I N G F R O M E N T R E P R E N E U R I A L FA I L U R E
Case Economic Social Psychological Physiological

A Manage money wisely Learned his need for

instant gratification not
good for business
B Evaluate potential business Don’t go into a business More realistic Importance of
on fundamental economic/ to rescue a personal assessment stress manage-
business principles relationship of personal skills ment program
Compile a team for future
business look for skills that
complement her’s
Stay positive at all times
when working with others
C Do research to insure Where can you get people Failure does provide
business idea is consistent whose skills complement a good learning
with sound economic/ yours opportunity
business principles
D Be sure you know where Always stay positive with Learned to be more
the money is coming from others you are working with flexible and adaptable
Can you work the people Learned the
you will need to in order to importance of
make the business a success thinking laterally
Cultivate a positive
attitude
E Apply options reasoning A poor match in a partner Gained a realistic view
to new venture formation can spell failure for the of what starting a
in future business so chose a partner business is like in terms
with similar work ethic and of financial and personal
values relationship stress

P1: A large percentage of problem-focussed
strategies employed when coping with venture
failure will address the economic aspects of
entrepreneurs’ lives.
P2: The use of problem-focussed coping in a
venture failure will enhance an entrepreneur’s
financial management skills in a subsequent
venture.
and adaptable’, ‘and cultivated a positive attitude’
respondents (see column 4, Table 6). We thus sug-
gest the following proposition for future research.
P3: The use of emotion-focused strategies of
reframing and personal re-examination when
dealing with an venture failure will increase an
entrepreneur’s self-knowledge when starting a
subsequent venture.

Two emotion-focussed strategies from Table 5 CONCLUSION

appear linked to the psychological learning that
took place. These two strategies are ‘personal re-
examination’ and ‘reframing’, strategies that were
enacted to cope with depression and despair (see
Table 5). These coping skills can be interpreted as
antecedents to psychological learning items report-
ed by respondents such as ‘more realistic assess-
ment of personal skills’, ‘learned to be more flexible
The purpose of the study was to explore how
entrepreneurs experienced failure, how they
coped with it, and how coping strategies influ-
enced what entrepreneurs learned from failure.
Such exploration is important given that failure
may induce strong emotions in entrepreneurs
and that these emotions may well interfere with
learning from failure (Shepherd 2003, 2004).

342 J O U R N A L O F M A N A G E M E N T & O R G A N I Z AT I O N Volume 13, Issue 4, November 2007


Understanding coping with and learning from
entrepreneurial failure also is important given
the emerging creation view of the entrepreneur-
ship process which holds that trial and error, or
a learning process, is a key feature of opportuni-
ty identification and exploitation (Alvarez &
Barney 2005).
Findings contribute to our understanding of
the entrepreneurial process by corroborating that
entrepreneurs do experience failure quite broadly
in their lives across all four of the following
aspects: economic, social, psychological and phys-
iological. This is an important finding because it
shows the sweeping effect venture failure has on a
founder’s life and provides a more thorough
description of the non-economic aspects of fail-
ure than previously available in the literature. For
example, current findings indicate entrepreneurs
experience psychological aspects beyond the grief
hypothesized by Shepherd (2003) including
depression, anger, guilt, and even the develop-
ment of phobias! While we heartily endorse
Shepherd’s (2003) notion of a grief recovery
process for failed entrepreneurs, current results
suggest developing a somewhat broader model
for recovering from the more comprehensive
array of psychological issues uncovered in these
five cases. Perhaps an integration of Shepherd’s
grief recovery process and coping process models
from the involuntary job loss literature can pro-
vide such a framework.
Current results also have implications for prac-
tice and for policy makers. Again, findings show
entrepreneurs the aspects of their lives they can
expect to affect should a venture fail. Perhaps
support mechanisms can be put into place in
anticipation of some of these issues through cur-
rently existing mentorship programs. From a pol-
icy making perspective, present findings suggest it
is crucial for governments wishing to foster entre-
preneurship to think more holistically about this
phenomena and especially to consider the ramifi-
cations of entrepreneurial failure. In particular,
policy makers could consider expanding already
existing infrastructure so that it supports the
Volume 13, Issue 4, November 2007 J O U R N A L O F M A N A G E M E N T & O R G A N I Z AT I O N
Coping with entrepreneurial failure
social, psychological, and physiological aspects of
entrepreneurs’ lives affected by failure. Current
infrastructure probably supports the economic
aspects much more so than any of these other
aspects of entrepreneurs’ lives. Such support,
according to current findings may enable entre-
preneurs who have lost a business to cope better
with the repercussions of the loss, learn from it,
and go on to found another venture more likely
to succeed.
Whether considering theory, practice, or poli-
cy, readers are reminded that the findings report-
ed here are exploratory in nature and need
further corroboration through future research. It
is our hope that this study provides a modest first
step toward illustrating the potential of entrepre-
neurial failure research to widen our knowledge
of the entrepreneurial process.
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Received 25 October 2006
Accepted 31 May 2007
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