Manuscript Development Workshop: Making Sense of Exit and Failure

4th February

The purpose of this workshop is to help colleagues develop their manuscripts on the topics of exit and failure. Four papers will be presented, as follows:

Paper 1: The Fear of Failure in EntrepreneurshipGabriella Cacciotti & James C. Hayton

One of the most common fears among entrepreneurs is called the fear of failure (Bosma et al. 2008). Drawing on psychological and socio-psychological theories, the experience of fear of failure can be described as the appraisal of threats in evaluative situations with the potential for failure (Conroy 2001). These situations activate cognitive schema or beliefs associated with the aversive consequences of failing and may cause different behavioural responses: approach the threat aggressively (fight), avoid facing the situation (flight), or be paralyzed in the situation (freeze) (Conroy 2004; Gray 1971; Elliot 1997). However, an examination of the entrepreneurship literature shows that the fear of failure is predominantly assumed to be a barrier to entrepreneurship.

This assumption has two important consequences on the study of fear of failure: 1) the role of the construct is mostly examined in relation to the decision to start/not start a business venture, and 2) the focus of the analysis is only on its detrimental rather than beneficial effects. This restrictive perspective on the nature and experience of fear of failure has led researchers to think that fear is not or should not be part of the entrepreneurial journey. We challenge this assumption on theoretical ground and set the stage for future empirical investigation.

Our objective is to shine a brighter light on the fear of failure (FF) phenomenon. Following a review of the existing entrepreneurship literature that addresses FF, we demonstrate clear limitations in research on fear of failure in this setting to date. The field has only considered a limited aspect of the behavioural and affective correlates of fear. Before considering the broader psychological and social psychological literature on the fear of failure, we discuss the diversity of the entrepreneurial setting to highlight the emotional, cognitive, and behavioural complexities fear of failure may generate in this context. We then refer to relevant theoretical frameworks and propose a conceptual model with testable propositions to guide future research.

Paper 2: Should I Stay or Should I Go? A Job Embeddedness Perspective on Entrepreneurial Staying.Alex Newman, Kohyar Kiazad & Cristina Neesham

In this study we highlight the importance of job embeddedness theory as a framework for understanding the phenomenon of entrepreneurial staying as opposed to entrepreneurial exit, and develop a number of testable propositions concerning the role of embeddedness in the entrepreneurial process. Specifically, job embeddedness theory reframes our understanding of the psychosocial process underlying the decision of the entrepreneur to stay by including attachment-related influences, such as organization and community-related fit, links and sacrifices. We argue that the relative importance of different embedding forces will vary with the

nature of the contextual influences experienced by the entrepreneur. Such contextual influences may take the form of individual, organizational or societal factors.    

Paper 3: The social processes of sensemaking around failure in entrepreneurial venturesLyon, J., Lockett, A. & Ucbasaran, D.

The failure of a business signals the end of the road for the venture (i.e. ‘terminal’ failure). The build-up to the terminal failure of a venture is commonly characterized by a series of smaller failures, such as adverse deviations from the venture’s warranted business plan. If not dealt with, these smaller failures may escalate into terminal failure. Surprisingly, the literature on entrepreneurial business failure does not consider these smaller failures, and their potential escalation into terminal failure. To address this gap our study seeks to explain entrepreneurial actors’ – including entrepreneurs, investors’ and board members’ - responses to smaller failures.

Bringing together concepts of sensemaking, cognitive frames and Bourdieu’s notions of capital and disposition, we examine how an actor’s social position influences their sensemaking about entrepreneurial failure. Based on three longitudinal case studies of biotechnology businesses based in the UK, our study shows that the sensemaking process that follows failure events in entrepreneurial ventures is a highly contested social process. We reveal the differing diagnostic and prognostic cognitive frames of the key actors. Further, we explain the sources of differences in the content of these frames by showing how social structures shape differences in these cognitions, and then how they lead to different interpretations of a failure event and different behaviors. Further, we find that the plurality of cognitive frames in entrepreneurial ventures can lead to paralysis and in some cases dysfunctional political activity and conflict.

Legally, the Directors of the business are obliged to represent the interest of all shareholders at all times and act in the best interest of the Company as a whole. We show how their history, past experience and resultant cognitive frames may interfere with their ability to enact this obligation. Our work has important implications for entrepreneurial ventures who will inevitably experience small failures, but which wish to avoid these escalating into terminal failure.

Paper 4: The Rocky Road of Business FailureOrla Byrne & Dean Shepherd

In contrast to grief and process models of business-related failure, which focus mostly on events post business failure, this multiple case study of 13 entrepreneurs with failed businesses, identifies four distinct phases associated with the business failure process. These phases include (i) descent of the business, (ii) decision to close the business, (iii) closing the business and, (iv) recovery of the entrepreneur. We develop the idea of change across these phases to capture the dynamics of emotions, coping, obstacles, and sensemaking associated with business failure. First, we find a rollercoaster of negative emotions, where negative emotions are high while experiencing the demise of the business but decrease when the entrepreneur decides to close the business; following this, negative emotions escalate as the decision to close is implemented and its consequences are felt; negative emotions then subside as time passes after the failure event. Second, although problem-focused coping is used considerably during the demise of the business, it is used little around the decision to close the business but regains prominence around the failure event. Third, obstacles relating to finance and the competitive environment were high during the demise of the business but had little impact on the decision to close the business. In

contrast, regulation obstacles increased around the closure of the business and then decreased as time passed. Fourth, sensemaking increased for some entrepreneurs after the decision to close the business but for others it increased over time after the closure of the business. These findings extend the emerging model of a business failure process, where the focus has been on life post failure. We highlight how the entrepreneur experiences business failure over a longer period, that begins well in advance of a business failing and extends well beyond the failure event.

Timings:

09:00 - 09:30 Arrival & Coffee

09:30 - 10:15 Paper 110:15 - 11:00 Paper 2

11:00 – 11:15 Coffee

11:15 – 12:00 Paper 312:00 – 12:45 Paper 4

13:00 – 14:00 Lunch