ARE FAILURES BLAMED ON MISFORTUNE OR MISTAKES? ENTREPRENEURIAL FAILURE ATTRIBUTIONS IN US NEWSPAPERS
Melissa S. Cardon, Case Western Reserve University
D. Ryland Potter, Case Western Reserve University
ABSTRACT
INTRODUCTION
ENTREPRENEURIAL FAILURE
ATTRIBUTION THEORY IN
ENTREPRENEURSHIP
FAILURE ATTRIBUTIONS:
MISFORTUNES OR MISTAKES?
METHOD
RESULTS
DISCUSSION AND IMPLICATIONS
CONCLUSION
CONTACT
REFERENCES
TABLE 1
TABLE 2
Failure is a fundamental component of entrepreneurship. This study examines cultural views of failure within the US through the lens of attribution theory. Specifically, we examine under what conditions failures are attributed to mistakes made by entrepreneurs themselves versus being attributed to misfortunes, of factors that adversely impacted the venture but were outside of the control of the entrepreneur. We collected all articles concerning business failures during 1999, 2000, and 2001 from four major US newspapers, and analyzed 497 accounts of business failure. Our data suggests that perhaps failure is not readily accepted universally, as anecdotal evidence would suggest. Instead, we see a change in failure attributions and acceptability across time and by the geographical area where the failures occurred.
“Each subculture in American life—whether gender or region, profession or class— seems to have its own code of failure: what kinds are acceptable, how to treat those who fail, rules that protect the status of the subculture and its members. Where Silicon Valley exalts failure, Wall Street punishes it ruthlessly” (Michael Lewis, New York Times, August 1999).
Failure is an important phenomenon in entrepreneurship, encompassing both the causes and consequences of failure for individuals, organizations, and society (e.g. Shane, 2001; McGrath, 1999; McGrath & Cardon, 1997). Several studies have examined factors leading to the failure or success of new ventures (Shane, 2001), but few have explored the broader culture in which those failures take place (Cardon & McGrath, 1999) and its implications for continued entrepreneurship.
One important avenue of exploration concerns how society at large views such entrepreneurial failure. The perception of and/or tolerance for failure may significantly impact whether would-be or nascent entrepreneurs pursue opportunities of which they are aware, despite the high risk and effort involved in starting a new business. These cultural perceptions may also impact the attributions individual entrepreneurs make for setbacks they experience, and how they change their behaviors accordingly in decisions to continue to develop the business despite hardship or to cut their losses and close the business immediately (Cardon & McGrath, 1999). More broadly, cultural perceptions of failure may profoundly influence the allocation of resources towards risky ventures. For example, if failure such as business loss or personal bankruptcy is deemed acceptable or “normal” in the US, then individuals may find easier access to capital and may be more inclined to pursue ventures even with unproven or ill-prepared business models. Conversely, if failure is viewed as intolerable and the associated stigma carries over into personal and social stigmas, then potential entrepreneurs would be less likely to pursue entrepreneurial opportunities.
While many popular sources suggest that failure is widely accepted in the US, empirical study of this popular sentiment has not yet been performed. Nor is the notion that entrepreneurial failure is good clear in our academic or popular models. In fact, the literature is quite mixed concerning when failure is productive versus destructive. We suspect that this may be due to differences in changing business and economic realities over time, and may be based on geography or industry sub-cultures, such as where failure is more tolerated within the looser West coast culture than within the more rigid East.
The purpose of this paper is to explore failure attributions made in public sources in order to gain a more grounded view of how entrepreneurial failure is viewed and tolerated in the US. For example, is failure more accepted or stigmatized in certain times or places within the US? Do certain sources typically place responsibility for failure on the entrepreneurs themselves or upon conditions outside of their control?
We use the term ‘misfortune’ to reflect the view that failures are caused by circumstances the entrepreneur could not control, such as a poor economy. In contrast, we use the term ‘mistakes’ to reflect failures seemingly due to avoidable errors, such as a poor business model or the inability of entrepreneurs to properly steer their ventures. We seek to explore which of these attributions (or others) are more prevalent in the characterization of the US business environment, as this indicates a wide-ranging outlook that may profoundly influence the incidence of entrepreneurship (whether and by whom businesses are started) as well as the individual entrepreneur’s experience during and subsequent to failure.
Failure forms a fundamental component of entrepreneurship (McGrath, 1999). In fact, Learned (1992) argues that entrepreneurship is the study of failed attempts to start new businesses. While many scholars strive to understand and thereby avoid failure (e.g. Kets de Vries, 1985, Romanelli, 1989), others argue that failure provides an important learning opportunity (McGrath & Cardon, 1997), and acts as a catalyst for further economic and business development (McGrath, 1999).
On its surface, failure is bad; something to be avoided, and many studies are still done on what factors lead to the survival and success of businesses (e.g. Shane, 2001). Failure can be “painful and costly, can generate vicious cycles of discouragement and decline, and can obviously be mismanaged” (McGrath, 1999: 16). Given these consequences, one can hardly imagine an entrepreneur starting a new venture with the intention or goal of having it not succeed.
Yet failure may also be quite functional, in that it provides an opportunity for the entrepreneur to learn something (Baker, Aldrich, Langton, and Cliff, 1997) and improve their entrepreneurial competence (McGrath & Cardon, 1997). Failure may also serve as a catalyst for the creation of new industries (Garud & Van de Ven, 1992; McGrath, 1999) and lead to innovation in growing or existing fields. Individual experience in overcoming obstacles such as failure leads to resiliency and a sense of self-efficacy (Wood & Bandura, 1989), both essential components of entrepreneurship (Gartner, 1990). Furthermore, outright failure may provide a clear signal of cause-effect relationships that helps an entrepreneur recognize and interpret otherwise ambiguous outcomes (Sitkin, 1992). Failure is clear and more definitive than success, which involves continuous improvement and changing goals.
Because of its importance in the entrepreneurial process, some scholars argue that we need a more nuanced view of failure and its implications. For example, Cardon, Zietsma, Saparito, Matherne, and Davis (forthcoming) argue that exploring the various points during the entrepreneurial process at which failure can occur may yield significantly greater insight than merely examining failures of organizations that have already emerged. This sentiment echoes that of other scholars, who note that studying organizational foundings and deaths does not highlight founding attempts that did not reach the start-up phase (Katz & Gartner, 1988), and that failed intentions to start businesses warrant our attention (McGrath, 1999). Scholars have also noted that responses to failures vary among individuals, depending upon their self-efficacy, resilience or persistence (Yanchus, Shaver, Gatewood, & Gartner, 2003), or even their level of emotional attachment to their venture (Cardon et al., forthcoming).
While scholars recognize that the context or environment in which entrepreneurship occurs is important, no empirical study has yet examined the culture of failure within the US. The structure of payoffs in a given culture shapes individual motivation and firm-level selection processes (Baumol, 1992). The rewards and sanctions within a culture for attempted and possibly failed ventures may have profound influences on entrepreneurial activity and risk tolerance (McGrath, 1999; McGrath, MacMillan, and Scheinberg, 1992). Significant sanctions for failure may reduce incentives to engage in entrepreneurship and may deter future entrepreneurial efforts (March and Shapira, 1987; McGrath, 1999). Conversely, if we value and reward failure as a “badge of honor” then entrepreneurs may be more inclined to throw in the towel when times get hard rather than persisting, to not only cut their losses but also to boost their resume by being able to boast of a failed business and the supposed learning and enrichment that comes with it.
It is this climate in which failure has potential to be both a detriment and an opportunity for greatness that nascent entrepreneurs must enter. While scholars have established that failure can be both devastating and uplifting, an understanding of the circumstances leading to these two very different views remains elusive. Can an entrepreneur or investor predict whether their failures will be viewed as heroic or tragic? We attempt to add some empirical evidence concerning the climate of failure in the United States, to aid in both understanding the broader cultural norms regarding failure, and to establish some boundary conditions around failures, in order to better determine which (or where or whose) failures are tolerable and which are not. We examine accounts of failure from the perspective of attribution theory.
ATTRIBUTION THEORY IN ENTREPRENEURSHIP
Social psychological theory suggests that the attributions people make for events impact their cognitive, affective, and behavioral responses to those events (e.g. Dweck & Leggett, 1988; Weiner & Kukla, 1970). Attributions are the mechanism through which people explain their own behavior, the actions of others, and events in the world (Heider, 1958; Shaver, 2001). If we can explain the causes of events, such as starting or ending a business, then we can better predict behavior and events in the future (Shaver, 1985; Jones & Davis, 1964). Two primary dimensions of causality have emerged in the literature, including the locus of causality (internal or external) and the stability of those causes (stable or variable). Locus of causality indicates whether an event is due to reasons internal to the person experiencing the event, such as the entrepreneur, or due to reasons outside of their control, such as due to a bad economy. Stability indicates whether those making the attributions believe this cause is stable and unchangeable, or variable, meaning that more or different effort or changing economic circumstances may yield a different outcome.
Gatewood, Shaver and Gartner (1995) have used the locus of causality and stability dimensions to help understand the reasons entrepreneurs might go into business. They discovered that the “why” of starting a business made a difference to “what” was later accomplished by those entrepreneurs (Shaver, 2001). They also find the self-serving attribution bias (Bradley, 1978; Weiner & Kukla, 1970) at play, whereby people tend to attribute their successes internally and their failures externally. Shaver (2001: 13) predicts that an entrepreneur would blame venture failure on external conditions, whereas the affected venture capitalist would place blame squarely on the shoulders of that entrepreneur. This self-serving bias has been noted clearly in entrepreneurship research (Baron, 1998), as well as among managers (Clapham & Schwenk, 1991).
Interestingly, in terms of stability of these causes, Gartner, Shaver, and Aggarwal (2001) discovered that entrepreneurs believed opportunities available to them are external and stable, while problems they experienced are also due to external causes, but are variable. As these authors point out, this “enterprise-serving” pattern makes it possible for entrepreneurs to believe both that external opportunities will continue to exist and be available to them (stability), and that problems exist, but are solvable (variability). This suggests that entrepreneurs recognize problems in their environment, but also expect to be able to overcome them.
FAILURE ATTRIBUTIONS: MISFORTUNES OR MISTAKES?
So far we have argued that within a culture failure may be viewed as good or bad, blamed on the individual or the environment, and that those cultural attributions have an important influence on the sense-making processes and behaviors of nascent and emerging entrepreneurs. Applying attribution theory to understanding failure accounts in popular media outlets, we believe two broad categories of attributions will emerge. The first involves entrepreneurs subject to misfortune, or failures due to things beyond their control. This is the external locus of causality. The second category we anticipate finding involves blaming failures on mistakes, such as inadequate ability or effort, improper strategies, or poor business models. This involves an internal locus of causality.
As the attribution literature, specifically the self-serving bias, suggests, we would expect that newspaper accounts of failures would primarily involve internal causality attributions where entrepreneurs are blamed for the mistakes that led to their failed businesses. While this general pattern is present, we also find highly differentiated patterns of failure attributions, based primarily on changes in the broader economic climate and geographical differences in failure tolerance.
Earlier work in entrepreneurship has shown that a grounded understanding of this phenomenon can be harvested from stories about entrepreneurs presented in the national media, the meanings found in the national media may affect individual sense-making about entrepreneurship as a career, and more generally may affect the social, political, and financial capital access available to entrepreneurs (Dodd & de Koenig, 2002). Newspapers are a primary indicator of the social and cultural context of entrepreneurship, because they provide the richest stream of narratives regarding the life and business creation of entrepreneurs (Dodd, 2002).
We searched the Lexis-Nexis database for four US newspapers (The New York Times, Chicago Sun-Times, The Washington Post, and USA Today) containing all articles concerning business failures during 1999, 2000 and 2001. The papers were chosen to represent different large cities within the US to capture potentially different perspectives on failure. We identified 217 articles using the following terms: business failure cause, business failure attribute, entrepreneur failure, entrepreneurial failure, founder failure and angel and venture. Qualitative data analysis techniques were used to identify patterns in the data, as described below. The data was reviewed and coded by two independent scholars, with agreement on 98% of the articles.
From the 217 articles originally identified, 193 were used in this analysis. Those that were excluded contained information relevant to the abstraction of failure in this culture, but did not contain any direct statements regarding the failure of a venture. Overall, 517 citings were taken from the articles, 497 of which contained direct statements about the causes of a venture’s failure. Broadly speaking, mistakes accounted for 268 of the 497 attributions found in the articles, and misfortunes 223 of the 497. This appears to favor attributions of mistake (~54%) over those due to misfortune (~45%).
Our research found the scope of failure attributions as wide-ranging as the perceptions of the nature of failure. As previously discussed, the causes can be broken down into two major groups, one reliant on factors external to the entrepreneur, therefore, uncontrollable (misfortune), and the other, internal to the effort and ability of the entrepreneur (mistake). The misfortunes we discovered centered around several ideas, notably: the undue influence of (external) cultural values and their impact on the success of a business, market forces (including the economy) acting in a way that harms the foundation of the venture, and the lack of available funding, when attributed to the unwillingness of venture capitalists to initiate or continue funding. Conversely, mistakes were most often ascribed to flaws in the business model, regarding either the concept itself or in its planning, mismanagement, or entrepreneurs’ unrealistic expectations about the nature and course of starting a new business. A summary of the results is in Table 1.
Mistakes
The notion of failure being due to entrepreneurial mistakes was discussed in terms of one of two major categories: poor concept and/or poor planning and mismanagement. Conceptualizing a business and planning out its goals and the method by which to accomplish them form the basis of a enterprise’s business plan. A flaw in either cripples the business from the start, and the venture has little chance for survival. Mismanagement does not exclude improper goal setting or development, but it implies that the company ultimately fails due to decisions made during operation by the CEO, founders or other influential employees. 94 articles (18%) cite poor business plans when attributing failure, while 78 (16%) place blame with poor management.
Ability, another identifiable categorization of shortcomings, differs from mismanagement in that mismanagement reflects inferior decision-making skills, while ability denotes inherent qualities such as leadership and one’s personal countenance. “Hubris” or pride also reflects a personal quality, identifying entrepreneurs’ inability to listen to the ideas and suggestions of those around them. In our data, 13 articles blamed venture failure on lack of ability, including hubris of the entrepreneur.
Believing the myth of untold riches lying behind every I.P.O. and buying into the ease of starting one’s own business cost several founders their businesses, exposing their unrealistic expectations and trust in unsound prevailing cultural notions. 40 articles discuss the dangers of placing confidence in artificially-inflated expectations, primarily the belief that the entrepreneur has the ability to enter into any business and “get rich quick.” Many entrepreneurs in our sample who thought they could revolutionize the industry, especially in the retail-or e-tail-segment, found that customers were not willing to switch from the “old” system to the new. They soon found that operating under the expectation of completely altering consumer behavior was neither a sound plan nor a reasonable prospect, and subsequently failed.
Misfortunes
Misfortunes primarily had to do with technical problems, inability to obtain financing (which was blamed on the financial providers, not the entrepreneurs), unrealistic expectations, and other market forces. Technical problems confronted many who base their businesses on currently inadequate technological applications or those who face the dearth of highly-skilled employees. Sometimes, the very technology, the backbone of these companies, ends up hurting them. Several sources cite “glitches” or outright technical failures that lead customers away, costing businesses vital contracts. Financial problems varied in their causes also haunt many of these start-ups. The high cost of marketing and establishing brand identities forces many entrepreneurs to overspend their budgets, leaving little to allocate to other aspects of operations. More than as mistakes, financial problems are often attributed as misfortunes. These problems encompass investors who refuse to fund ventures, and later, the loss of revenue felt when other customers, themselves small businesses, fail.
One occurrence associated solely with misfortune happens as a lack of funding or aid offered to start-ups. 53 of the articles in our sample offer this explanation as part of the cause of failure. To some degree, the data direct blame at the venture capitalists for the failure of these businesses, whether they choose not to fund initial ventures or refuse to continue to fund companies already operating. Although several articles state that scarce funding helps to clear out the weaker businesses and unprofitable models, both the sources and venture capitalists acknowledge that viable ventures suffer needlessly because of unavailable assistance. Since the continued funding, and therefore, the continued chance at survival is threaded on an “investor’s whim,” we consider insufficient aid to be a misfortune faced by entrepreneurs (USA Today 6/28/2000).
The market and investors’ unrealistic expectations constitute 19 of the 63 articles concerning misfortunes. Along with culture, representing 22, these unrealistic expectations correspond with societal, business and environmental pressures placed upon business owners by people not directly involved in its operation, or beyond the entrepreneurs’ control. If investors discontinue funding to a profitable business because they now estimate it will not earn them as great a return as they had envisioned, and the business fails as a result of a shortage of funds, the entrepreneur cannot shoulder fault, even if “not getting really really rich . . .[is] a violation of expectations.” (NYT 7/20/1999) Here, the unrealistic expectation foisted on the business and its owners by outside forces cause failure.
Market forces, attributed largely to misfortune, take into account the larger forces at work in our economic system. E-tailers drowned in a sea of other companies, hence, market saturation played a part in their failures. “First movers” or established companies with access to greater capital used their advantages to wipe out smaller competitors. Market forces can be further broken down into segments of timing, the economic state, economic cycles and speed (how quickly a start-up can gain recognition and customers). Timing, related to being the first in a market, proved a definitive factor for the success of businesses. As one paper reported, “Timing is everything . . . it is absolutely the case that an I.P.O.’s success has a lot more to do with the I.P.O. market than with the fundamentals of the business” (NYT 7/20/1999). And as one person, optimistic at least about the nature of failure and the virtue of entrepreneurship, said, “Failure is the price of being on the bleeding edge, on the forefront of something you take pride in” (NYT 8/20/2000).
Differences Based on Timing
With these basic formulations in mind, we discovered several additional patterns in the data, the most obvious being differences in attributions each year. These results are summarized in Table 2. In 1999, the identification of mistakes and misfortunes splits almost evenly at 54 mistakes versus 53 misfortunes. In 2000, the difference between the two widens, as the account of mistakes soars to 132 versus 100 misfortunes. By 2001, despite fewer citations than in 2000, the gap remains with 97 reported mistakes and 69 total misfortunes. This suggests that the salient economic time frame had an important influence on the cultural attributions for business failures in our data, specifically that as the economic downturn continued, additional blame was placed on the entrepreneurs themselves rather than the poor economy.
With the exploding number of failed businesses in 2000 (262 in 2000 compared with 107 in 1999 and 166 in 2001 in our data), one might infer that the willingness to overlook personal failure and to accept it as an unfortunate but not debilitating event is entrenched. Yet the attribution for mismanagement and poor business models, both putting the blame squarely on the shoulders of the entrepreneurs, skyrockets from 28% of the failure accounts in 1999 to 37% in 2000 and 36% in 2001.
Between 1999 and 2001 reports naming “unrealistic expectations” as either a mistake or a misfortune also increase greatly, going from 5% of failure accounts in 1999 to 19% in 2001. Again and again, the same reasoning appears. In 1999, analysts worry about potential entrepreneurs’ “distorted view of how easy it is to get wealthy.” (NYT 7/20/1999). By 2000, news accounts reflect on “the Great Gold Rush of 1999,” which along with the expectation that consumers would change their behaviors, might have “created an attitude of invincibility that might have led companies to risk too much.” (NYT 12/14/2000) By 2001, we find that the basic rules governing our economic system have not changed, and that despite all the hopes pinned on it, the “New Economy” will not replace the old. And whereas, “2000 began with hubris...In 2001, we are learning humility,” the humility coming with a strong public backlash against the economic and social success of dot-com entrepreneurs (Post 9/6/2001).
Interestingly, while not accepting failure in the standard sense, the public’s reaction is its own catharsis, in that it confirms failure as an accepted “normal” way of life. A mix of emotions such as jealousy and displacement at entrepreneur’s early success brought relief and a sense of justice when they later failed. Although the associated financial problems might not be welcome, failure at this stage appears acceptable because on at least one level and for some segments, it is exactly what the public wanted.
Financial problems, an obstacle shared by both ill-fated and ill-suited entrepreneurs, take on a new perspective in 2000 and 2001. Although evenly split in 1999, by 2000 and continuing in 2001, the numbers shift to favor blaming financial problems on misfortune rather than mistakes. The early articles generally cite overspending and poor decision-making in the allocation of funds as examples of mistakes made by entrepreneurs. In 2000, we find that its “tougher to stay afloat” in a market where investors are unwilling to support enterprises (Post 5/25/2000) and where the beginnings of a domino effect of toppling small businesses in failures that sweep the business (and revenue) out from other ventures’ feet. Reflections on the destruction became more detailed as we clear away the dot-com rubble in 2001. Here mistakes were identified as entrepreneurs’ spendthrift budgets and cash flow, while misfortunes centered again on the rising tide of failures engulfing other businesses, the negative climate, and the dearth of funding.
Citations of deficient funding rises correspondingly in 2000 and 2001, by entrepreneurs, reporters and analysts, which further supports the attribution theory. The theory places blame external to the entrepreneur, and in this case, onto the shoulders of the venture capitalists, for cultural reasons regarding the implications of failure. Incidentally, at least one article supports the “enterprise-serving” pattern. On March 18, 2001, The New York Times reports that, “Even though [entrepreneurs] know the economy is largely responsible [for their failures], they thought they should have been able to conquer it.” Again, although entrepreneurs recognized flaws in their environment, they expected to be able to overcome them.
Regional Effects
Early in the research, a pattern involving the region in which the start-up was located and the perception of failure developed. Silicon Valley, it seems, has such an infrastructure that supports failure such that entrepreneurs feel that success would not have been possible outside of the Valley (USA 2/22/1999). Chicago reporters most often voiced displeasure with their city and it’s measures to increase funding to entrepreneurs, the aversion of its investors to anything that isn’t a “perfect” deal or otherwise risk-free (CST 4/20/1999), comparing itself and its culture to that of Silicon Valley, where the culture and success of the Valley was seen as admirable and enviable. Each Chicago source cites the Valley’s support of failure and strong network as features its own entrepreneurs wish they had. Reports from Washington D.C., also emphasize and admire the start-up culture available to Valley denizens and hope to grow to be the Valley’s East Coast complement and rival.
However, in 2000, along with the changing economic situation, the focus shifts away from lauding the Valley’s failure network where failure had become “alarmingly common” to discussing each region’s positives and negatives, with an emphasis on how to be successful in the future (USA 9/18/2000). In 2001, we saw areas in Northern Virginia, Washington D.C. and Chicago start to build infrastructure, get greater access to financing and gain a firmer idea of what, if any, qualities from Silicon Valley they would like to adopt. As the picture of failure becomes clearer and its focus targets entrepreneurial mistakes, many articles acknowledge that ultimately, the business plans were at fault and that many should never have received funding. Perhaps unwilling to commit to creating that kind of culture or willing to let such volatility and risk be the marker of the Valley, each of the studied regions chose to let Silicon Valley stand on its own and has instead pursued its own growth strategy based on their own region’s cultural and economic constraints and opportunities.
We know that entrepreneurs experience failures. What had not yet been examined is how those failures are viewed by the cultures in which they take place. Our data suggests that perhaps failure is not readily accepted universally, as anecdotal evidence would suggest. Instead, we see a change in failure attributions and acceptability across time and by the geographical area where the failures occurred. Generally speaking, failures are blamed more on entrepreneurs themselves than on conditions outside of their control, which is consistent with the self-serving bias predicted by other research (Shaver, 2001; Baron, 1998). However, this pattern is not universal. While failures were evenly blamed on misfortunes and mistakes in 1999, they were much more heavily blamed on mistakes by 2001, reportedly due to mismanagement, poor business models, and unrealistic expectations. In addition, while financial problems were initially blamed on mistakes in 1999, by 2001 they were predominantly attributed to misfortunes outside of the entrepreneurs’ control. Regional differences were also found, where generally failure was much more tolerated in Silicon Valley than anywhere else. While initially other cities such as Chicago, New York, and Washington were envious of the failure-tolerant culture on the West Coast, the shift to placing blame on the shoulders of entrepreneurs’ mistakes had these cities instead maintaining their more conservative cultures.
This suggests that regions and time (or current economic climates) are important factors in the allocation of blame for failure events in entrepreneurship. While our findings are consistent with the self-serving bias explained by others, they go further to say that this bias is not universal and is not as overwhelming as might have been expected. For example, in 1999 we found an almost even distribution of attributions on mistakes and misfortunes. This suggests that research on entrepreneurial failure should not only consider the cultural climate in which the venture exists, but should not make sweeping generalizations or assumptions about that climate. Instead, cultural views on failure should be explicit modeled and measured in our research.
In that vein, this exploration of failure attributions in the US media highlighted several areas that seem to be particularly suited for further inquiry. First, we do not yet know how entrepreneurs themselves react to these cultural attributions, either in anticipating failures or in making their own attributions and reactions for them—e.g. in their coping cognitions, affects, and behaviors. As Cardon and McGrath (1999) suggest, it could be that even within a failure-tolerant culture, individual entrepreneurs attribute and react very differently to their own setback experiences. Additional research that more closely examines the linkages between cultural perceptions of failure, individual failure attribution and subsequent behaviors seems warranted.
Secondly, we do not yet know how these cultural attributions for failure are made in different countries. Some scholars have suggested that in general, business failures may be “professionally forgiven” (Petzinger, 1997) in individualist cultures (Hofstede, 1980) while bankruptcy can have a devastating economic and social impact in collectivistic cultures (e.g. McGrath, 1999). Yet with a recent movement towards globalization, and the opening up of the business environment to the expansion of entrepreneurship, our views of failure may have changed as well. For example, studies in China by a leading scholar (Wong, 2003) find failure acceptable in some areas of China, often considered to have a very collectivistic culture (Hofstede, 1980).
Finally, an important potential limitation of this data is that the period during which this information was drawn was heavily influenced by the explosion of the online community. Many of the articles found dealt directly with “dot-coms” and their failures. While we believe this paper’s theoretical foundation and findings are not limited to this time period, the specific patterns and failure tolerance levels found might prove to be specific to this phenomenon. In order to determine this, further research encompassing different years and/or sources is warranted.
While we know that small, new ventures are quite susceptible to failure (Stinchcombe, 1965), we do not yet know much about those failures. This study focused on the attributions for failure made in newspapers, in order to help shed light on the social and cultural context within which entrepreneurs operate. Cultural views of failure, particularly the propensity to blame failure on misfortunes versus mistakes, are not universal and should be carefully modeled and measured in future research.
CONTACT: Melissa S. Cardon, Weatherhead School of Management, Case Western Reserve Univ., 10900 Euclid Avenue, PBL 225, Cleveland, OH 44106; (T) 216-368-2092; mcardon@po.cwru.edu
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