Case 1 | Case 2 | Case 3 | Case 4 | Case 5 | Case 6 | |
---|---|---|---|---|---|---|
Name | Marius | Brian | Mikko | Paulo | José | André |
Nationality | Danish | Danish | Finnish | Portuguese | Portuguese | Portuguese |
Age | 25 | 26 | 27 | 49 | 48 | 35 |
Education level | High school | Bachelor degree | Bachelor degree | Master degree | MBA | Master degree |
Business area | Medical/cosmetics | Food cutlery | Food services | Leisure activities | Sound engineering | Automation engineering |
Investment | €300 thousand | €7 thousand | n/a | n/a | €300 thousand | n/a |
Year started | 2007 | 2005 | 2008 | 1998 | 2007 | 2007 |
Year closed | 2013 | 2006 | 2009 | Undefined (but closer to 2007) | 2013 | Undefined (but closer to 2011) |
Business area | Consumer electronics | Consultancy and education | Business events operator | Wearable devices (manufacture of electrical equipment) | Consumer sound engineering | Retail consulting |
Investment | n/a | Residual | n/a | €4.5 million | n/a | €500 thousand |
Year started | 2012 | 2010 | 2009 | 2007 | 2004 | 2011 |
Previous year revenue | €1.1 million (Crowdfunded) | €40 thousand | €2.9 million | Undisclosed | Undisclosed | Undisclosed (positive) |
Interview date | 6/6/2014 | 3/25/2014 | 3/11/2014 | 2/27/2014 | 6/2/2014 | 5/26/2014 |
Duration (minutes/hours) | 50 m | 1 h | 1 h | 2 h | 50 m | 45 m |
Note: n/a, not available
A thorough search on Web of Science TM , performed in January 2017, using the keywords “business failure” or “start up failure” or “company bankruptcy,” in the field of Business Economics resulted in 213 journal articles (excluding eight non English and one response), of which 12 proved to be mostly unrelated to our subject. Out of the sample (201 journal articles), 78 percent were empirical studies, 12 percent were discursive in nature, 7 percent were revisions of the state-of-the-art, and 3 percent dealt with theoretical issues.
The remaining 25 percent of the journal articles dealt with, among other issues, how failure is conceptualized, fear of failure in constraining decision for taking advantages of entrepreneurial opportunities, or the role of funding and capital availability and other policies in mitigating/preventing business failures.
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Amankwah-Amoah , J. ( 2016 ), “ An integrative process model of organisational failure ”, Journal of Business Research , Vol. 69 No. 9 , pp. 3388 - 3397 .
Andreeva , G. , Calabrese , R. and Osmetti , S.A. ( 2016 ), “ A comparative analysis of the UK and Italian small businesses using generalised extreme value models ”, European Journal of Operational Research , Vol. 249 No. 2 , pp. 506 - 516 .
Artinger , S. and Powell , T.C. ( 2016 ), “ Entrepreneurial failure: statistical and psychological explanations ”, Strategic Management Journal , Vol. 37 No. 6 , pp. 1047 - 1106 .
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Bolinger , A.R. and Brown , K.D. ( 2015 ), “ Entrepreneurial failure as a threshold concept: the effects of student experiences ”, Journal of Management Education , Vol. 39 No. 4 , pp. 452 - 475 .
Bruton , G.D. , Khavul , S. and Chavez , H. ( 2011 ), “ Microlending in emerging economies: building a new line of inquiry from the ground up ”, Journal of International Business Studies , Vol. 42 No. 5 , pp. 718 - 739 .
Byrne , O. and Shepherd , D.A. ( 2015 ), “ Different strokes for different folks: entrepreneurial narratives of emotion, cognition, and making sense of business failure ”, Entrepreneurship Theory and Practice , Vol. 39 No. 2 , pp. 375 - 405 .
Cannon , M.D. and Edmondson , A.C. ( 2001 ), “ Confronting failure: antecedents and consequences of shared beliefs about failure in organizational work groups ”, Journal of Organizational Behavior , Vol. 22 No. 2 , pp. 161 - 177 .
Cardon , M.S. and McGrath , R.G. ( 1999 ), “ When the going gets tough … toward a psychology of entrepreneurial failure and re-motivation ”, in Reynolds , P. , Bygrave , W.D. , Manigart , S. , Mason , C.M. , Meyer , G.D. , Sapienza , H.J. et al. (Eds), Frontiers of Entrepreneurship Research , Babson College Press , Wellesley, MA , pp. 58 - 72 .
Cardon , M.S. , Stevens , C.E. and Potter , D.R. ( 2011 ), “ Misfortunes or mistakes? Cultural sensemaking of entrepreneurial failure ”, Journal of Business Venturing , Vol. 26 No. 1 , pp. 79 - 92 .
Chen , J.H. and Williams , M. ( 1999 ), “ The determinants of business failures in the US low-technology and high-technology industries ”, Applied Economics , Vol. 31 No. 12 , pp. 1551 - 1563 .
Cope , J. ( 2011 ), “ Entrepreneurial learning from failure – an interpretative phenomenological analysis ”, Journal of Business Venturing , Vol. 26 No. 6 , pp. 604 - 623 .
Deakin , E.B. ( 1972 ), “ A discriminant analysis of predictors of business failure ”, Journal of Accounting Research , Vol. 10 No. 1 , pp. 67 - 179 .
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Eidenmüller , H. and van Zwieten , K. ( 2015 ), “ Restructuring the European business enterprise: the European Commission’s recommendation on a new approach to business failure and insolvency ”, European Business Organization Law Review , Vol. 16 No. 4 , pp. 625 - 667 .
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Everett , J. and Watson , J. ( 1998 ), “ Small business failure and external risk factors ”, Small Business Economics , Vol. 11 No. 4 , pp. 371 - 390 .
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Hofstede , G. and McCrae , R.R. ( 2004 ), “ Personality and culture revisited: linking traits and dimensions of culture ”, Cross-Cultural Research , Vol. 38 No. 1 , pp. 52 - 88 .
Jenkins , A.S. and McKelvie , A. ( 2016 ), “ What is entrepreneurial failure? Implications for future research ”, International Small Business Journal , Vol. 34 No. 2 , pp. 176 - 188 .
Jenkins , A.S. , Wiklund , J. and Brundin , E. ( 2014 ), “ Individual responses to firm failure: appraisals, grief, and the influence of prior failure experience ”, Journal of Business Venturing , Vol. 29 No. 1 , pp. 17 - 33 .
Khelil , N. ( 2016 ), “ The many faces of entrepreneurial failure: insights from an empirical taxonomy ”, Journal of Business Venturing , Vol. 31 No. 1 , pp. 72 - 94 .
Kirkwood , J. ( 2007 ), “ Tall poppy syndrome: implications for entrepreneurship in New Zealand ”, Journal of Management & Organization , Vol. 13 No. 4 , pp. 366 - 382 .
Lane , S.J. and Schary , M. ( 1991 ), “ Understanding the business failure rate ”, Contemporary Policy Issues , Vol. 9 No. 4 , pp. 93 - 105 .
Mantere , A. , Aula , P. , Schildt , H. and Vaara , E. ( 2013 ), “ Narrative attributions of entrepreneurial failure ”, Journal of Business Venturing , Vol. 28 No. 4 , pp. 459 - 473 .
Mueller , S.L. and Shepherd , D.A. ( 2016 ), “ Making the most of failure experiences: exploring the relationship between business failure and the identification of business … ”, Entrepreneurship Theory and Practice , Vol. 40 No. 3 , pp. 457 - 487 .
Mueller , S.L. and Thomas , A.S. ( 2001 ), “ Culture and entrepreneurial potential: a nine country study of locus of control and innovativeness ”, Journal of Business Venturing , Vol. 16 No. 1 , pp. 51 - 75 .
Nielsen , K. and Sarasvathy , S.D. ( 2016 ), “ A market for lemons in serial entrepreneurship? Exploring type I and type II errors in the restart decision ”, Academy of Management Discoveries , Vol. 2 No. 3 , pp. 247 - 271 .
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Rider , C.I. and Negro , G. ( 2015 ), “ Organizational failure and intraprofessional status loss ”, Organization Science , Vol. 26 No. 3 , pp. 633 - 649 .
Safley , T.M. ( 2009 ), “ Business failure and civil scandal in early modern Europe ”, The Business History Review , Vol. 83 No. 1 , pp. 35 - 60 .
Shepherd , D.A. ( 2003 ), “ Learning from business failure: propositions of grief recovery for the self-employed ”, Academy of Management Review , Vol. 28 No. 2 , pp. 318 - 328 .
Shepherd , D.A. , Patzelt , H. , Williams , T.A. and Warnecke , D. ( 2014 ), “ How does project termination impact project team members? Rapid termination, ‘creeping death’, and learning from failure ”, Journal of Management Studies , Vol. 51 No. 4 , pp. 513 - 546 .
Shepherd , D.A. , Wiklund , J. and Haynie , J.M. ( 2009 ), “ Moving forward: balancing the financial and emotional costs of business failure ”, Journal of Business Venturing , Vol. 24 No. 2 , pp. 134 - 148 .
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The second author’s research has been financed by the European Regional Development Fund through COMPETE 2020 – Programa Operacional Competitividade e Internacionalização (POCI) and by Portuguese public funds through FCT (Fundação para a Ciência e a Tecnologia) in the framework of the project POCI-01-0145-FEDER-006890.
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Because entrepreneurship entails uncertainty, business failure is a common outcome for entrepreneurs. When entrepreneurs encounter business failure, they carry a financial, social, and emotional burden associated with the failure. However, the magnitude of this burden differs by institutions, influencing entrepreneurial decisions and behaviors. Although institutions governing the rules of business failure are a topic for a rapidly growing field of research, research on this topic is highly fragmented. Therefore, the purpose of this systematic review is to unpack the relationships between institutions—governing the rules of business failure—and entrepreneurial decisions/behaviors. The paper provides a fine-grained and comprehensive review of the relevant literature and develops an agenda to guide future research.
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Short-term changes are based on some joint historical experience that leads to shared shift in norms in formative years or adolescence of a given generation. (See Zhang & Acs, 2018 ).
Entrepreneurial exit can occur at any stage of the business life cycle. The exit can have two paths either successful entrepreneurial exit or failure (See Wennberg et al., 2010 ).
Regarding empirical issues, most previous studies have used GEM (Global Entrepreneurship Monitor) data to capture the fear of failure while assuming it links to psychological traits, which may not be the case. Shaper survey instruments would be helpful to improve our understanding of the source and the role of the fear of failure.
We acknowledge that our framing of institutions was simplified for practicality.
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The authors are grateful to Dr. J. Hessels and two anonymous reviewers for their kind support during the four revision periods in 2.5 years.
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Chong Kyoon Lee
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Johan Wiklund
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Alejandro Amezcua
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Lee, C.K., Wiklund, J., Amezcua, A. et al. Business failure and institutions in entrepreneurship: a systematic review and research agenda. Small Bus Econ 58 , 1997–2023 (2022). https://doi.org/10.1007/s11187-021-00495-4
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Accepted : 13 April 2021
Published : 30 April 2021
Issue Date : April 2022
DOI : https://doi.org/10.1007/s11187-021-00495-4
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