Learning from Entrepreneurial Failure: A study of the extent to which learning reported by entrepreneurs

been applied in their subsequent entrepreneurial endeavor

Written by Sukumal Somboon and Sara Grundstrom

A thesis submitted toSten K. Johnson Centre for Entrepreneurship in

School of Economics and Management at Lund University

In partial fulfillment of the requirements for M.Sc. in Entrepreneurship, New Venture Creation

9th May 2014

ACKNOWLEDGEMENT

This publication is a part of our research work at Lund University for the Master’s in

Entrepreneurship program. We would like to express our appreciation to our families and the

Swedish Institute for their great support.

TABLE OF CONTENT

SABSTRACT 1

INTRODUCTION 2

LITERATURE REVIEW 5

Failure in Entrepreneurship.............................................................................................................................................5

Entrepreneurial Learning Process.................................................................................................................................6

Lessons from Entrepreneurial Failures.......................................................................................................................8

Implementation of Learning Outcomes....................................................................................................................11

METHODOLOGY 14

Sampling Method................................................................................................................................................................ 15

Interviewees Pre-Screening and Selection..............................................................................................................15

Data Collection..................................................................................................................................................................... 16

Data Analysis........................................................................................................................................................................ 16

FINDING RESULTS 18

Backgrounds of Entrepreneurs....................................................................................................................................18

Entrepreneurial Failure...................................................................................................................................................19

Learning through Reflecting and Coping.................................................................................................................23

Learning Outcomes from Past Failures.....................................................................................................................26

Whether or Not Entrepreneurs Apply Learning Outcomes.............................................................................29

DISCUSSION 31

Failure upon Entrepreneurs’ Experiences...............................................................................................................31

From Learning to Knowledge........................................................................................................................................32

Implementing Learning Outcomes in Subsequent Entrepreneurship.......................................................34

Extent of Learning Outcome Implementation........................................................................................................36

CONCLUSIONS AND IMPLICATIONS 38

LIMITATIONS 39

LIST OF REFERENCES 41

APPENDICES 45

ABSTRACT

Failure in entrepreneurship is considered as part of the entrepreneurial learning process

yet certain entrepreneurs fall for the same counterproductive mistakes again. This leads to the

ambiguity whether learned lessons from failure are beneficial to entrepreneurs or if it is just

optimistically overrated. This qualitative study focuses deeper in to how entrepreneurs perceive,

attribute and cope with failure and how learned lessons from past failures are applied in

subsequent ventures. Respondent entrepreneurs were selected through a mix of convenience and

purposive sampling. Semi-structured interviews were conducted to gather data from individuals

who have previously failed in entrepreneurial projects but reentered an entrepreneurial career.

Entrepreneurs was for this reason comparable as well as the definition of failure being that the

entrepreneurs own expectations of their venture was not met rather than failure as a result of

bankruptcy. The study examines their learning process from reflecting on failure to coping

strategies and most importantly, knowledge application. This research reveals that unless

individuals reflect on learning outcomes they gained from their experience and implements them

subsequently; such lessons are meaningless no matter how valuable they are thought to be. The

implementation of learning outcomes is the key factor that differentiates entrepreneurs who

actually gain positive impacts from their failures apart from those who gain negative ones.

Keywords: failure in entrepreneurship, coping with failure, entrepreneurial learning, integrative

learning, knowledge implementation

1

INTRODUCTION

Gibb (1997) describes failure in entrepreneurship as the ultimate form of trial and error

and as the key approach from which entrepreneurs learn. In order for entrepreneurs to make

sense and transform failure to success, they “must learn from the failure”, “bounce back and start

again to apply what they have learnt” (Ucbasaran, 2011, p. 12). Accordingly, entrepreneurs

should prepare themselves to understand and be able to handle failure in entrepreneurship.

McGrath (1999) indicates that failure in the entrepreneurial process is inevitable but can be

served as an opportunity for entrepreneurs to learn and develop. Also, John Maxwell (2012,

p. 16) stated in his book that “Failure is not final - failure is simply a price we pay to achieve

success and if we learn to embrace that new definition of failure, then we can move ahead. It’s

the price you pay for success”.

It is claimed that failure in entrepreneurship represent a tough yet priceless learning

experience that nurture entrepreneurs for uncertainty and pressure in entrepreneurship. However,

it is not clear how entrepreneurs that believe they have encountered failure are using their

knowledge in future endeavors and how this process proceeds. Cannon & Edmondson (2001)

explicates how negative feelings about failure hinders immense reflections to effectively reflect

from failures, having positive attitudes toward failures would be an essential strategy for

entrepreneurs to cope and learn from their mistakes and push themselves forward (Politis &

Gabrielsson, 2007). Consequences of failures can cause effects for entrepreneurs in four aspects

that are economic, social life, psychology, and physiology (Singh, Corner & Pavlovich, 2007).

Nevertheless, entrepreneurs can cope with their failures through problem-based or emotional-

based strategies (Drnovsek, Ortqvist & Wincent, 2010). By doing so, entrepreneurs would

overthrow the grief of failing and can then balance it out resulting in moving forward toward

success (Shepherd, Wiklund & Haynie, 2009). Success does not necessarily mean never fail or

having the world at one’s feet but can simply mean never repeating the same failure for the

second time.

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Despite entrepreneurial failures can positively affect entrepreneurs, the effects do not

automatically occur just because entrepreneurs fail (Ucbasaran, 2011). To beneficially learn from

past failures, entrepreneurs must reflect on and take actions toward past failing experiences

(Cope & Watts, 2000; Minniti & Bygrave, 2001; Shepherd, 2003). One of the crucial actions that

entrepreneurs have to take is knowledge implementation; learning outcomes would become

useless if entrepreneurs did not actually apply explicit knowledge they have learned through their

practical experiences in the new ventures they embark on. Because learning from failures can

assist entrepreneurs to move forward to success (Cope, 2011; Politis & Gabrielsson, 2007;

Shepherd et al., 2009), it is important to know how entrepreneurs do to benefit from failure.

One of the extended areas of studies suggested by Singh et al. (2007) and Cope (2011) is

an exploration to which extent entrepreneurs have indeed applied learning outcomes associated

with past failures in their future entrepreneurial process. By taking the study of Burgoyne and

Hodgson (1983) into account, entrepreneurs learn from their failures differently which can be

categorized to three distinctive learning levels. Therefore, a deeper investigation into the extent

of knowledge implementation can indicate which learning level entrepreneurs are at and

differentiate learning outcomes of each level. Consequently, the authors have identified the

research gap as whether or not the entrepreneurs actually exploit their learning outcomes in their

subsequent entrepreneurship and to what extent they apply such knowledge as stepping-stones

for success in their current ventures. To go beyond current research studies and fulfill this gap,

this research aims to comprehend the phenomenon of learning from entrepreneurial failure

through knowledge implementation from experiences of entrepreneurs who have faced failures

in previous entrepreneurship but still have re-entered into entrepreneurial projects. By doing so,

the current studies in entrepreneurial failure and learning process will be connected and broaden

into knowledge implementation area. The understanding in integration between learning

outcomes and knowledge application would benefit entrepreneurs in overcoming failures and

moving forward. Accordingly, the following research questions are outlined:

Have the entrepreneurs been able to apply what they learned from failure?

If so, to which extent have the entrepreneurs implemented their learning outcomes?

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The study proceeded as follow; literatures concerning topic of failure, learning outcomes

from failure, and learned lessons implementation will be presented and explained. Main

frameworks that were used are the combination of academic researches from Burgoyne and

Hodgson (1983), Singh, Corner, and Pavlovich (2007), and Ucbasaran, Shepherd, Lockett, and

Lyon (2013). The method section is outlining stages of the research procedure. Results are

presented elaborating on key themes. Research questions are answered in the discussion

implementing literature review and finding results from the interviews. Then, this research is

concluded with the main findings and limitations.

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LITERATURE REVIEW

FAILURE IN ENTREPRENEURSHIP

In entrepreneurship, most theories focus on new venture creation and growth through the

process of business opportunities recognition and commercialization in conjunction with failure

avoidance (Shepherd, 2004). Nevertheless, failure in entrepreneurship cannot be completely

evitable and is pervasive among startups. According to statistics, half of businesses established in

Europe closed down within five years of their operations (European Commission, 2013). The

situation is even worse in the United States where 50% of startups could not survive in year four

and less than 30% of them succeed after ten years of operations (Statistic Brain, 2014). Before

entrepreneurs eventually prevail with their endeavors, they generally failed 3.8 times in average.

This figure is adopted from John Maxwell’s book Failing Forward (2012) that encourages

entrepreneurs to shift their negative perceptions toward failures into positive ones. Maxwell

elaborates on the right attitudes toward mistakes and the determination to learn from them

because he believes that these topics could be used for distinguishing entrepreneurs who are

actual success achievers apart from typical failures.

The first and foremost thing to do before this study shall begin is to define what failure is

in entrepreneurship. Entrepreneurial failure has not had a universally accepted definition yet.

Each researcher defines it distinctively varied by their points of views. Even in the same area of

“failing forward”, dissimilar definitions of entrepreneurial failure were proposed. McGrath

(1999, p. 14), whose study focused on real options reasoning during entrepreneurial process with

intention to re-conceptualize failure, concludes, “…Failure is the termination of an initiative that

has fallen short of its goals”. On the other hand, the study of Shepherd, Wiklund, and Haynie

(2009, pp. 135) focusing on the financial and emotional costs of failure suggested that failure

happens when venture has “…a fall in revenues and/or rise in expenses are of such magnitude

that the firm becomes insolvent and is unable to attract new debt or equity funding;

consequently, it cannot continue to operate under the current ownership and management”.

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According to the above definitions, failure is defined differently upon researchers’

perspectives and focus of their studies. It is deviation from expectation of favorable outcomes in

conjunction with both avoidable and unavoidable consequences of entrepreneurial process

(Cannon & Edmondson, 2001). In the interest of this study, the authors tend to agree with

McGrath’s definition in which varies by the goal of entrepreneurship. Different entrepreneurs

would perceive failure differently in accordance to the their personal goals and the roots of

failure would be attributed under diverse circumstances (Ucbasaran et al., 2010). To enlarge

upon the definitions provided by McGrath (1999) and Ucbasaran et al. (2010), failure already

happened once the goals have slipped away; it does not have to cause the end of entrepreneurial

project nor any financial losses. To define it within the scope of this research, entrepreneurial

failure is a discontinuance of the actions pursuing entrepreneurial goals. With this definition,

entrepreneurs can clearly identify deviations from goals that they gave up and identify their own

failures. If ones are not able to realize that they already failed, it is unlikely for them to start

learning from failures. Thus, recognizing and accepting failure is an essential stage that would

encourage entrepreneurs to enter into entrepreneurial learning process.

ENTREPRENEURIAL LEARNING PROCESS

Experiencing failures in entrepreneurship is an expensive opportunity that

entrepreneurs can benefit from by extracting essential insights from failures and utilizing

acquired knowledge in their learning process (Shepherd, 2003; Sitkin, 1992). The paradigm of

negative perception toward failures had shifted to the optimistic one because a number of

scholars advocate positive learning outcomes that can be gained through failures. The new theory

believes that individuals learn more efficient from their experiences in failures over in successes

(McGrath, 1999; Shepherd, 2003; Sitkin, 1992). Shepherd (2009) argued that the learning

process includes a function of how individual feel – not solely how and what individual think.

This statement is supported by Cannon and Edmondson’s (2005) study that staying positive

while studying from failing experience, entrepreneurs can confront, review, and handle the

matters rationally. Having the right attitude toward failures is beneficial for entrepreneurs to

better learn from their trials and errors (Politis & Gabrielsson, 2007).

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Many researchers suggest that entrepreneurs must be able to pinpoint causes of failures

before they can actually learn from failure (Cannon & Edmondson, 2001; Politis & Gabrielsson,

2007; Sitkin, 1992). Cardon, Stevens, and Potter (2011) categorized the causes of failures into

two groups that are mistakes and misfortunes. If entrepreneurs themselves cause the failure, such

failures are considered as mistakes; otherwise, they are considered as misfortunes if they are

beyond entrepreneurs’ abilities to control (Cardon et al., 2011). In accordance to this

classification, it can be deemed that mistakes are internal reasons whilst misfortunes are external

reasons. Nonetheless, Ucbasaran (2011) argued that meaningful learning from failure could not

be executed automatically or straightforwardly. Only realizing the causes of failures would not

immediately make entrepreneurs learn. Mere failures can spark no learning; both personal

reflection and direct action are required from entrepreneurs in order to stimulate learning from

past failures and improve possibilities to succeed in subsequent entrepreneurship (Cope & Watts,

2000; Minniti & Bygrave, 2001). Furthermore, Cope and Watts (2000) suggests that reflecting

upon past failures during a learning process would make the entrepreneurial learning process

become more efficient. In order to achieve critical reflectivity, entrepreneurs have to seek for the

essence of failures and rethink on their personal understandings (Marsick & Watkins, 1990).

Together with an optimistic outlook, entrepreneurs can transform a stigma of failure into an

opportunity to flourish their future entrepreneurship in the long run based upon their learning

reflections and actions (Politis & Gabrielsson, 2007; Shepherd, 2003).

Failure may be seen as the price that entrepreneurs have to pay in order to reach success

(Maxwell, 2012) and the entrepreneurial learning process would be a long journey to get there.

After persevering against the hardships, entrepreneurs would have very little energy left to

bounce back from a catastrophe (Cope, 2011). Accordingly, entrepreneurs should also learn to

cope from business failure in order to decrease the psychological costs they have to suffer

through the tough time. Singh, Corner, and Pavlovich (2007) define coping with entrepreneurial

failure as cognitive and behavioral efforts to manage the imposing demands comprised by

venture failure. Drnovšek et al. (2010) divides the methods that entrepreneurs cope with their

failures into two strategies – problem-based coping strategy and emotion-based coping strategies.

Singh et al. (2007, pp. 334) identified two main types of coping: “Problem-focused coping is

managing, or changing a problem causing distress while emotion-focused coping regulates

emotional reactions to a problem”. In the finding by Singh et al. (2007), the majority of their

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cases in problem-focused coping was used to deal with the financial aspects of the failure such as

attempts to take legal action to be released from debt, borrowing money from friends and family,

and selling assets to get debt relief. In contrast, emotion-focused coping was aimed at addressing

the psychological consequences of failure and tended to take two forms: reality distortion and

self-deception like avoidance behavior, denial strategies, to reduce the generation of negative

emotions and secondly restoration, which emphasized positive imaging and personal re-

examination.

Hence, coping with failures is vital in learning process for entrepreneurs to recover from

grief and facilitate learning process enhancement in order to reinforce their motivation and

optimism in subsequent entrepreneurship (Shepherd et al., 2009). To conclude from above

explanation, going through entrepreneurial learning process will not automatically provide

entrepreneurs valuable lessons but will do only when entrepreneurs reflect on and take actions

toward from their past failures with the right attitudes (Cope & Watts, 2000; Politis &

Gabrielsson, 2007; Shepherd, 2003; Ucbasaran, 2011).

LESSONS FROM ENTREPRENEURIAL FAILURES

After the entrepreneurs had failed, they would be influenced by multifaceted aftermaths

or the costs of failures (Ucbasaran, Shepherd, Lockett & Lyon, 2013). In the case that an entire

entrepreneurial project had come to an end, Shepherd (2003) compared the negative emotion of

loss of a venture as a grief over the loss of a loved one. This vividly illustrates how much pain

entrepreneurs can come to endure. Nevertheless, the entrepreneurship extinction does not only

impact either financial or psychological aspects of an entrepreneur’ life but also significantly

affect other facets including social, physiological (Singh et al., 2007), professional, and

entrepreneurial (Cope, 2011). Within the scope of this research, the authors categorized

entrepreneurial learning outcomes into four particular lessons based on the framework of

entrepreneurial failure effects used by Singh et al. (2007). As a result, the lessons from failures

that entrepreneurs reflect on are distinguished within economic, social, psychological, and

physiological aspects.

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ECONOMIC ASPECT

Monetary loss is an anticipated economic consequence when entrepreneurs fail; however,

the economic aspect in this study covers the areas beyond financial costs. The degree of

economic loss is varied on a case-by-case basis. It is not only capital and investment in the

business that vanish, these financial costs sometimes are the reasons that put entrepreneurs into

personal debts and would take years to clear them up (Cope, 2011) In a broader perspective, the

costs of economic effects include an opportunity such as an absence or a reduction of personal

salary (Ucbasaran et al., 2013) and the value of alternatives forgone (Arora & Nandkumar,

2011). The collateral damage continues even though some of those people decide to turn their

back to entrepreneurial life and seek employment. The defeated entrepreneurs have to face

extremely difficulties to get hired after they had failed creating new ventures resulting in lack of

incomes (Singh et al., 2007). Furthermore, the higher the opportunity costs that entrepreneurs

have; the more aggressive in entrepreneurship they would be (Arora & Nandkumar, 2011). This

would enable large economic impacts to be plausible to occur.

SOCIAL ASPECT

Failure could affect social life of entrepreneur at both personal and professional levels

(Ucbasaran et al., 2013). It might not only cause the death of a business but also the end of social

network of bilateral or multilateral agreements (Harris & Sutton, 1986). The feeling of guilt and

obsoleteness aggravate entrepreneurs’ inability to interact with others (Cope, 2011). The

regression of relationships can be the result from the stigma with failures that the devastating

entrepreneurs are distant themselves from civil norms (Sutton & Callahan, 1987). More

specifically, the entrepreneurs who suffer from self-stigma believe society has a pessimistic

outlook toward them; therefore, they lower their self-esteem and even isolate themselves into

loneliness (Singh, Corner & Pavlovich, 2011). In some cases the situation is getting worse as

reputation of an entrepreneur is ruined (Ucbasaran et al., 2013). The disconnection with society

would make it harder for entrepreneurs to properly function in their daily life. Withal, the

intension in their relationships could get worsen and ultimately lead to the break up of personal

intimate relationships including marriages (Singh et al., 2007). Besides, stigma associated with

failure may not only have negative impacts toward current social life but also toward

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discrimination in job opportunities and credibility to access resources in the future (Sutton &

Callahan, 1987).

“In Europe, a serious social stigma is attached to bankruptcy. In the USA bankruptcy

laws allow entrepreneurs who fail to start again relatively quickly and failure is considered to be

part of the learning process. In Europe those who go bankrupt tend to be considered as “losers”.

They face great difficulty to finance a new venture.”

- European Commission (1998, p. 3)

PSYCHOLOGICAL ASPECT

Psychology covers an extensive area of multiple studies and could have both positive and

negative effects. Entrepreneurs can either feel despair towards entrepreneurship or feel highly

passionate to make a huge come back (Ucbasaran et al., 2013). Because this study focuses on

how entrepreneurs turn negative effects into positive ones, the authors would like to specify the

scope of psychological aspect in this research study only on its negative part within this section.

Ucbasaran et al. (2013) suggested that emotion and motivation are two interrelated psychological

costs underlying in experience of entrepreneurial failure. Mantere, Aula, Schildt, and Vaara

(2013) proposed two types of psychological process that support this characterization. The first

process is related to managing emotion associated with failure experience and the second process

is related to maintaining self-esteem in order to pertain motivation (Ucbasaran et al. 2013;

Mantere et al., 2013) Between the entrepreneurs and their ventures, there is an emotional bond

(Shepherd, 2003). Accordingly, most entrepreneurs are in grief when they face the adverse

outcomes (Shepherd, 2004). Their emotional state is altered after a journey when their business

has come to an end. A number of emotions, for instance, guilt, shame, inferior, disappointment,

and sorrow are unpleasant feelings that entrepreneurs have to endure through the grief period

(Bonanno, Goorin & Coifman, 2008). Interestingly, Parkes and Weiss (1983) suggested that the

longer period of time that entrepreneurs try to avoid the looming failure; the greater duration

entrepreneurs can emotionally prepare themselves to deal with losing their creation.

Nevertheless, there is a drawback to do so. Delaying the collapse of business can cost

entrepreneurs greater financially (Shepherd, Wiklund & Haynie, 2009).

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PHYSIOLOGICAL ASPECT

Physiological aspect associated with failure highly relates to the psychological

consequences. Surprisingly, a number of entrepreneurs are incapable to keep the balance of their

physical health while running a business, which results in deteriorating health (Singh et al.,

2007). Shepherd (2003) elaborated that the involuntary separation apart from their beloved

ventures could put entrepreneurs in grief. Grief – the major painful experience of the emotional

costs – sometimes trigger undesirable physiological symptoms that can be ranged from small

signs like weight loss and insomnia to serious illness such as decreased immune system and high

blood pressure (Cope, 2011; Singh et al., 2007; Singh et al, 2011). If entrepreneurs are in grief,

they have to gone through the five stages of grief including denial, anger, bargaining, depression,

and acceptance – if they can cope (Kübler-Ross, 1969). While struggling through each stage,

entrepreneurs are prone to have physical reflects such as fatigue, anxiety, nausea, panic attacks,

phobias, and et cetera (Shepherd, 2003; Singh et al., 2007). In conclusion, the combination of

negative consequences in consequences in psychology and physiology could push distressed

entrepreneurs into declined physiology at different degrees of severity (Cope, 2011; Shepherd,

2003; Singh et al., 2007). The learned lessons within physiological aspect could lead

entrepreneurs to know how to balance their works and lives.

In the respect of this research, learning outcomes from a proper entrepreneurial learning

process will lie within four aspects of lessons in economic, social, psychology, and physiology.

However, knowing what lessons entrepreneurs obtained from their past failures only cannot

indicate whether or not entrepreneurs benefit from these learning outcomes. Without taking any

actions toward past failures by learning outcomes implementation, entrepreneurs solely gain the

knowledge but not any advantages from failing experiences. The way entrepreneurs apply such

knowledge in their subsequent ventures will indicate how they profit from failures.

IMPLEMENTATION OF LEARNING OUTCOMES

It is important to underline that learning from failure does not occur automatically

(Ucbasaran, 2011) but happens when entrepreneurs reflect on what causes failure and react with

their existing knowledge to carry out subsequent entrepreneurial actions more efficiently and

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effectively (Shepherd, 2003). Additionally, Cope (2011) highlights that some entrepreneurs may

fail to learn due to an inability to effectively face what happened. Certain entrepreneurs may

want to think they have learned valuable lessons in order to rationalize what may otherwise be

considered an unproductive period of their lives (Cannon, 1995); thereby, repeating the same

mistakes in future activities (Shepherd, 2003).

However, entrepreneurs have the opportunity to reinvent themselves and become stronger

after experiencing failure and reflecting on faults (Cope & Watts, 2000; Seligman, 2011). If

entrepreneurs decide to see failure as something they can benefit and learn practical knowledge

from instead of something negative (Shepherd, 2003; Cope, 2010), lessons drawn from failure

with positive attitude can contribute to unleashing new perspectives of perceiving, thinking, and

acting (Sitkin, 1992). To do this, missteps have to be transformed into stepping-stones toward

success; entrepreneurs must implement knowledge they have learned afterwards (Ucbasaran,

2011). Entrepreneurs can implement the learning outcomes by making a connection between

their personal skill set and lessons from their failing experiences so they can grab more authentic

understandings (Huber, Hutchings & Gale, 2005) and then utilize learning outcomes by using the

extracted knowledge into other entrepreneurial actions; this is not limited to only repeating the

old entrepreneurial process or starting a entirely new venture (Shepherd, 2003; Shepherd, 2009;

Shepherd et al, 2009). A lack of knowledge implementation could deplete the value of high-

priced lessons intrinsic in failing experience and jeopardize the opportunity to develop both

entrepreneurial skills and new projects. Ultimately, knowledge implementation is key in

determining if the learning process will move entrepreneurs forward.

Learning implementation associated with failure is characterized by Burgoyne and

Hodgson (1983) into three levels and can be summarized as follows:

Level 1 – Certain legitimate learning outcomes are obtained but have no long-term effect

toward entrepreneurs.

Level 2 – Entrepreneurs’ learning outcomes are transferable from current case to another

specific situation.

Level 3 – Entrepreneurs’ learning outcomes were able to reframe their understandings

upon reflections.

The level two and three of this learning classification are used as a framework to scope the extent

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of knowledge implementation. The reason why level one gets omitted is because it does not

imply any signs of learning outcomes application; only lessons are obtained at this level. The

vivid difference between level two and level three is the object effected by knowledge

implementation. The extent in which entrepreneurs apply learning outcomes from past failures

into their current ventures differentiates the learning level of and benefits for each entrepreneur.

At level two, entrepreneurs implement lessons they learned from one entrepreneurial project to

another (Burgoyne & Hodgson, 1983) resulting in subsequent ventures get positive effects or at

least will never run into the same mistakes that entrepreneurs used to make. Whereas,

entrepreneurs who are in learning level three apply the knowledge on to themselves at a personal

degree due to reflection (Burgoyne & Hodgson, 1983). These three levels make it easier to

understand levels of implementation of learning outcomes (knowledge) entrepreneurs have

encountered through their experience of failure.

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METHODOLOGY

The method used for this research is qualitative research design. The choice of design

was supported by the research questions that strive to give a detailed level of understanding to be

developed (Maxwell, 2005) in the phenomenon of entrepreneurial failure, learning, and

knowledge implementation. The choice was based on the needs and demands of this particular

study (Morgan & Smircich, 1980). Further a qualitative phenomenological methodology with a

actorsoperative paradigm was developed to give the researchers potential to generate the richest

and most viable dataset and offer the greatest potential to produce significant research outcomes

answering defined research questions. Researchers considered alternative research designs

however as the filed of entrepreneurship is relatively young, this method supports the premise

that the qualitative phenomenological method may be appropriate because it is more oriented

toward discovery and allows researchers to focus on the subject’s individual experience, which

better explain the subject’s reality (Clark, 1998; Huberman & Miles, 1994). Moreover, this

method provides researchers with a greater flexibility in obtaining rich data that provides

opportunity to develop substantial research conclusions based on real world entrepreneurial lived

experiences. This design also focuses on the understanding dynamics present within single

settings (Weber, 1990) bringing forward the meaning participants place on events and processes

(Miles & Huberman, 1994).

The purpose of this research is to better understand the phenomenon of entrepreneurial

failure, learning, and knowledge implementation. The authors aim to identify important themes

among researched entrepreneurs and provide a rich description of the reality created by those

themes as they are lived out in a particular setting. Researchers have taken in consideration that

the researched entrepreneurs were explaining and filtering everything through their own personal

framework of beliefs and values. This means that it is not believed by the authors that there are

any absolute truths, but that reality is subjective and that there are multiple points of view that

can be understood by examining the perceptions of the individuals. The researchers are also

aware of the fact that participants’ backgrounds, opinions and beliefs influenced

phenomenological standpoints. This effect were limited through careful data preparation, coding,

and interpretations, the results of this qualitative analysis can therefore support the development

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of new theories, as well as validating existing theories and provide descriptions of particular

settings or phenomena (Weber, 1990)

SAMPLING METHOD

A mix of convenience sampling and purposive sampling method was used to identify a

sample group that had experienced discontinuance of a section or an entire project. This was

done with help from contacts within Sten K. Johnson Centre for Entrepreneurship. The definition

of failure was for the purpose of this research explained, as the entrepreneurs’ own expectations

not being met as main focus of the failure. According to Ucbasaran et al. (2010), it is not only the

sale or closure due to bankruptcy, liquidation, or receivership that cause failure but also that the

business or project failed to meet entrepreneurs’ expectations. McGrath (1999) also concludes

that failure is the termination of an initiative that has fallen short of its goals. Respondents in this

research were comparable as they all shared the belief that they had failed to meet their

expectations at least once in a business project or at several occasions.   

INTERVIEWEES PRE-SCREENING AND SELECTION

Initially, ten entrepreneurs were approached within the Skåne region due to convenience

for face-to-face interviews. An initial email was sent to the potential respondents, explaining the

aim of the research and the purpose of the interviews. This to ensure that they were the right

matches for this qualitative study, the purpose of the questionnaire was to identify

entrepreneurial experience within the group, details of their entrepreneurial projects, experience

of failure in previous projects (See Appendix A for the preliminary interviewee selection

questionnaire). Researchers then selected respondents from their answers in the questionnaire

that would allow for rich data to be collected.

The final sample group comprised of six entrepreneurs, six cases fits within Eisenhardt’s

(1989) criteria (4-10) to enable inductive patterns to emerge from data. The selected group was

divided into two groups, less than five years of entrepreneurial experience and five years above.

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This would allow research to identify any patterns between experience and learning from failure.

One of the selection criteria was also that they were now working on one or more projects, this to

allow exploring if they are using what they learnt from past failures in their new endeavors.

Respondents’ names are not disclosed for privacy reasons to allow respondents to speak freely in

the interviews; thereby, fictitious names are assigned to all respondents.

DATA COLLECTION

Data was collected using semi-structured interviews organized around a set of

predetermined open-ended questions, organized by categories. The main reason for choosing

interviews as the method of data collection instead of alternative methods was that during

interviews participants are asked about their experiences in a way that allows them to freely pick

specific memories and reflections in their own terms, rather than having terms imposed on them

by the interviewer. Also, a depth interview represents a basic method of collecting data, which

can provide the richness and in-depth experiential account of the event in the life of the

respondent (Fontana & Frey, 2005), required to truly understand the issue. Individual interviews

were used as it allows for the interviewer to delve deeply into social and personal matters.

(DiCicco-Bloom & Crabtree, 2006) This was in accordance with research questions that focus on

the entrepreneurs’ personal perception of the event of failure according to McGrath (1999) and

Ucbasaran et al. (2010). Interviews were conducted face-to-face and held within the allocated

office space for New Venture entrepreneurs at IDEON.

Categories and questions were developed according to frameworks discussed in previous

chapter. The interviews were open-ended; questions were designed to focus respondents on the

framework and give the interviewees the chance to tell their stories with minimal interruption by

the researchers. Interviews were recorded by mobile device and transcribed to ensure that no

details were missed. Interviews were conducted in Lund in April 2014 and each session lasted

for approximately one hour (see Appendix B for the interview questions).

DATA ANALYSIS

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Transcripts were analyzed for the purpose of examining the link between coping with

failure and how entrepreneurs are using what they learnt from their previous failures,

subsequently what benefits failure has engendered to them. To understand how entrepreneurs

make certain choices and how they behave, it is crucial to bring forward the meaning and

significance they give to specific actions and behaviors. The initial steps in analyzing interviews

was to listen to them in a detailed manner taking notes of each respondent's answers in order to

identify themes mentioned by each interviewee. This was done separately by researchers and

later compared to ensure that appropriate themes were selected from interviews, relating both to

frameworks and research questions.

Themes were identified and divided under Singh, Corner, and Pavlovich’s (2007, pp.

331) “Coping with entrepreneurial failure” four aspects: economic, social, psychological, and

physiological needed to fully comprehend how a person copes with failure.  Themes were also

identified to understand coping strategies taken by entrepreneurs to overcome their failures. This

was done by dividing themes into Drnovšek, Ortqvist, and Wincent’s (2010) coping strategies,

problem-based and emotion-based to further explain entrepreneurs learning process. Further to

understand entrepreneurs learning outcomes associated with failure, researchers used Burgoyne

and Hodgson (1983) three levels to explain learning outcomes.

Multiple frameworks were used as this helped researchers to limit the risk of coming to

false conclusions or premature ones as it limits inherent cognitive biases (Eisenhardt, 1989). The

real names of respondents are also replaced with aliases in order to protect their true identities

and to allow respondents to freely tell their stories. Results were then presented following the

logic of questions and theory presented in the previous chapter. Direct quotations were included

in the text to allow the reader to better understand the thoughts of the respondents, the context

and the emotions, and allow them to immerse into the situation. These thick descriptions also

lessened the analysis. (Eisenhardt, 1989).

17

FINDING RESULTS

The finding results are based on the information from the interviews and presented within

this section. They are divided into five themes and structured in relation to thematic analyses

within aforementioned theoretical frameworks. The main quotations and finding results are

explained according to the following themes. The first theme investigated is entrepreneurs’

backgrounds where entrepreneurs were asked to elaborate on their entrepreneurial projects and

experiences. The second theme focuses on entrepreneurial failures, respondents’ experience of

failure, and their perceptions of how this event affected their lives. This followed by exploring

the cause of the failure in terms of external and internal factors causing the failure. The third

theme is learning through reflecting and coping that examined how entrepreneurs coped with the

failure and which coping strategies entrepreneurs applied whether it is problem-based or

emotional-based or both strategies. Next step is to explore how the entrepreneurs learned from

their failures; all respondents were allowed to express what they believe they learned from their

failures. The final theme is implementing learning outcomes in subsequent entrepreneurship that

dig deeper to find out if entrepreneurs have applied learning outcomes in their current projects.

The authors are here elaborating on key themes together with quotes to clearly get an overview

of the results of the interviews.

BACKGROUNDS OF ENTREPRENEURS

There were six interviewees selected from our pre-screening process. Alias names –

Anders, Beatrice, Calle, David, Erika, and Fredrik – were used to identify each respondent

instead of using their real names. The following information presents their backgrounds.

Anders has been involved in several startups although he only identified himself as an

entrepreneur for the past three years. He spent several years in college in Lund and also studied

aboard as an exchange student in both China and Norway. Anders explained that he is always 18

looking for new challenges and this might be a reason why he is an entrepreneur. One of his first

projects was in a non-profit organization that he built with his friends. He was also involved in a

few companies that done advertising on bicycles and building mobile application for nursing

homes. At the present time, Anders is working with LUSIC and other social entrepreneurial

projects.

Beatrice is one of the most experienced entrepreneurs in this research; she had her own

television production company for the past eight years that allowed her to get involved in many

entrepreneurial projects during this period. Her company was going well but she wanted to enter

into the social entrepreneurship field so she decided to start a new venture that focuses on

creating branding content within the scope of corporate social responsibility.

Calle is a co-founder of a company producing and importing leather bags from Africa

since three years back. He co-found it with his local friends; this venture is his first

entrepreneurial project. While being a student at the Master of Entrepreneurship program at Lund

University, Calle is also starting up another project selling fire logs made from reused coffee

with his classmates.

David is a serial entrepreneur; he explains that he tries out new ideas daily to see if they

have valid business potential. David is the founder of many new media marketing and lifestyle

companies but his first one was established four years ago. At the moment, David is dedicating

most of his time to his marketing company.

Erika has six years experience in entrepreneurship. Her entrepreneurial career started

when she opened her own salads bar. Her business went well for few years but then it had to be

closed down. Erika explained that she finds it hard to work for someone else so she has become

an entrepreneur. Fortunately, she found her way back to run a business and is now selling

renewable materials to Swedish building contractors.

Fredrik owns two food-trading companies and has worked in this field for eight years.

His first company was shut down before he consecutively started the second one. Besides doing

a business in food trading, Fredrik has just started a consultancy firm working with import goods

between Sweden and Middle-East Asia. He is also a graduate student in entrepreneurship

program at Lund University.

19

ENTREPRENEURIAL FAILURE

Respondents were asked in several questions how they perceived failure in terms of

entrepreneurship, descriptions of failures they have faced, and goals in those projects. All

entrepreneurs shared that they had not experienced any major business losses that had resulted in

major bankruptcy but all had experienced failure in terms of not meeting their goals through their

entrepreneurial endeavors.

ANDERS

According to the interview responses, Anders who has been involved in several startups

explained failure as something natural occurring when working in projects and could be used as

a tool to learn and to develop what you do in a better way. The failure Anders described was in a

project he was running which goal was to build a co-working space where social entrepreneurs

could meet and help each other develop their ideas. The failure that he experienced was that their

management team was not able to collaborate and communicate effectively resulting in the

dropout of the hosting sponsor. They did not really listen to each other and even got annoyed

working together. The situation went even worse when everybody tried to fight against each

other so no clear communication was made among colleagues; therefore, they were unable to

work in a team effectively. Ultimately, the dropout of sponsor and conflicts within management

team had put the entire project into termination.

"Even I did not feel a huge difference I did feel a tension and I am sure that my friends

noticed that I was a more agitated than normal"

BEATRICE

Beatrice has many years of experience as an entrepreneur but she still face failure when

her initial goals was not met. She described the goals of the project was to get her production

company up running in a short amount of time. While she was putting all of her efforts to make it

happen, she felt a lot of pressure and sometimes thought of how hard it is to be a female

entrepreneur. If her project was not going ahead, it meant she would not have any income to

20

support herself and her children. Under the high pressure, Beatrice decided to focus on getting

funded by a sole investor in order to receive financial support as soon as possible. It turned out to

be a poor decision relying on only one individual.

“I felt a lot of pressure. I put that on myself and I think it might be that being a woman is

sometimes hard as an entrepreneur.”

“The project was not going a head which meant that I would not have any money coming

in, that made everything every difficult to plan ahead.”

“I was too reliant on this guy and I did not have a backup plan.”

CALLE

Calle has had his own business selling leather bags for the past three years. He felt that

the failure that he experienced been that he lost a lot of opportunities. His goal of the business

was to make a living out of his company. This has affected him economically and

psychologically as he felt that he could have made different choices to increase opportunities for

the business.

“It was the decision of not establishing a team complementing each other that decreased

potential of the project financially.”

“I suppose that I felt regret that I did not bring a new partner in that could help grow the

business.”

DAVID

David has been taking part in many startups especially in new media marketing and is

currently running his own marketing company. David explained that when he started off each

business, he had various points of view toward each venture. He focused on performing well in

business operations but overlooked to establish a business model of each venture that would

make every startup he was involved in financially sustainable which he considers as a failure.

21

“Having no proper business model that would focus on financials made it less

potential.”

“I have to say that I had a different view of business at that time and I listened to old-

school thoughts too much"

ERIKA

Erika started with opening her own salads bar in Skåne at the beginning of her

entrepreneurial career. Her described failure resulted in being forced to shut her first venture

down a few years ago. She said that this unpleasant experience affected all parts of her life in

one-way or another. She explained that she lost her investments and some additional money yet

there was no major loss.

“I lost my initial investments and some additional cancellation costs but I did not die or

anything.”

“When I did not know how to handle the situation I felt frustration and of course I was

irritated that we could not find a solution.”

FREDRIK

Last but not least, Fredrik has eight years experience as an entrepreneur running his own

food export company and a consultancy firm. Failure for Fredrik was when he had to restructure

his whole business a few years back. This had a main effect to him economically because his

family lost investments and some capital but still was not in any major debt. Fredrik said that this

failure actually made him see things from a positive side straight away and new potential

opportunities to do business in other ways.  

“I have to say that I was looking at the bright side of what happened. I felt enthusiastic

to close as soon it was possible to work fully on new business model, of course I felt a little

worried at times that we would not have enough money to cover all costs.”

22

“I felt stressed at times but not sure if that was positive or negative, I got out of the

failure on a positive note."

LEARNING THROUGH REFLECTING AND COPING

Respondents were asked to reflect upon what had caused their failure in terms of internal

and external factors to better understand causes and how they attributed the causes of their

failures. All entrepreneurs shared that they could identify both internal and external factors

causing their failure. This was followed by questions around coping strategies divided into the

four aspects that can be affected by failure in order to better understand how they coped with

their failures. Most of the entrepreneurs had a mix between emotion-based and problem-based

coping strategies.

ANDERS

When Anders reflected upon his failure experience he could pinpoint both internal and

external reasons for his failure. One was that he was inexperienced as well as his partners in the

project.

“I was not experienced enough at the time, I was always late in finding solutions and was

not very good at sharing problems with others.”

“I believe that the initiator of the project had preset ideas of how the project should be

run, this resulted in lack of expertise being brought in to help us move on.”

“I should not have stopped discussing with them; that way, we might have kept our

sponsor.”

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Anders described himself as a very emotional person, which showed through how he was coping

with failure. He applied a complete emotion-based coping strategy by “first looking at myself

and see the situation for what it is” and “realize the importance of reflecting and not overreacting

towards failure”.

“I worked at trying to not blame other people in the project, I have to look at myself and

see the situation for what it is, sometimes I make mistakes but I try to apologize to people fast.”

“I realized the importance of reflecting and not overacting toward failure.”

He also explained that failure in his case did not have any economic effects on his life; however,

from a social point he explained;

“Even I did not feel a huge difference I did feel a tension and I am sure that my friends

noticed that I was more agitated than normal.”

BEATRICE

Beatrice explained that she was taking a fatal chance when she was working on her

project; her decision to rely on one individual did not work out but was difficult to foresee

“What happened was that I put too much belief and time into one single person to carry

me through to the next step.”

“He, my investor, was going through a divorce which made him let go of everything else

and completely let go of our project together.”

Beatrice who was reliant on only a sole investor in her entire project later on managed to find

alternative ways to get herself out of economic difficulties but not funding the project. She then

explained that she believe that her experience, ten years as an entrepreneur, got her through her

difficulties and eased up her coping moment.

“Luckily I was able to find alternative financial support for myself.”

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“I felt anxious that things would not be okay but experience took me through it.”

CALLE

Calle’s internal cause of failure is his decision to team up with people that he was

familiar with rather than the people who compliment each other to grow business whereas his

external reason was based on the fact that his supplier was not being consistent with the quality

of raw material.   

“It was my own personal decision to group up with people that I get on with and like, but

that does not necessarily make a great team to grow business with.”

“We had difficulties to get the same quality with each order from the supplier, sometimes

it was very high standards while the next lot would not have the same quality.”

He was the only entrepreneur that only focused on a problem-based coping strategy where he

explained that he “focused on balancing the quality and profit so that we could improve the

quality” to continue his business.

“I spent time to focus on balancing the quality and profit so that we could improve the

quality.”

DAVID

Results show that sometimes the external factors caused the internal as for David that

“listened to old school thinking” which then resulted in  “lack of business model”.

“We started with a lack of business model because we had not considered making much

money from the project, I had more a personal goal to make the world better.”

“It was from listening to old-school thinking that making good to the world should not

gain financial benefits. It was really other people judgments that effected us.”25

ERIKA

Erika felt that it might have been her own actions that had an effect of on the failure

however she also believes that it could be circumstantial.

“Like in most cases I get hot-headed and make decisions very fast.”

“In many cases it might have been an effect of my actions but I believe that many

business opportunities just got lost due to circumstances.”

FREDRIK

In Fredrik’s case, his family selected a highly niche product that was difficult to sell; their

product selection is an internal factor. When combining with the external factor, which was a too

narrow market size and inability to make a payment of his customers. His business had

eventually faced the discontinuance. Some grounds were completely unrelated; for instance,

“I had a dream of selling very high quality products that the customers did not

necessarily want, I had to educate them on their eating habits which was harder than I could

have imagined. It was too ambitious and I was too stubborn to adapt with mass demand.”

“There were things that we could not effect like cheques being returned and customers

not paying. It all had an effect, the products where niche which talked to a narrow target

audience which is a small market share which then did not make enough turnover"

LEARNING OUTCOMES FROM PAST FAILURES

Respondents were asked several questions regarding learning from failure, benefits it

could have had and what they learned from their experience of failure. All of respondents agreed

that they learned something from failure; it was not only a negative experience but also a

priceless lesson for the entrepreneurs.

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ANDERS

Anders explained that he learned the importance of having a “strong team” to have a

successful venture or project. Moreover, he stated that the most important learning outcome for

him was getting to know himself better. He explains that he had to learn how to “put himself

first” in the sense that it will never be a good outcome if he just does things to please others.

Psychologically, he was able to better understand and solve arising issues during the project.

“For a project to be successful you have to put yourself first, really know yourself to be

able to even listen to others.”

“What happened to me was that I had to overcome the conflict of ideas and perspectives,

I think I did through understanding and love.”

BEATRICE

Beatrice’s main learning was that she had to have a back-up financial plan and could not

rely on only one source of investment to fund a whole project. She also realizes that “most things

are in our own control” and it is important to listen to our body and mental state so that we do

not overdo things. This learned lesson comes from her intensive experience according to

Beatrice’s opinion.

“I learnt that you always have to have a back up plan how to get your money in.”

“I now jump on support from all directions, I will not be in the same situation again.”

“I learnt that you could not let yourself be blinded by one individual as unexpected

events can happen which can stop project suddenly.”

“You can do more than you think, most things are in our own control; you have to listen

to the body and mental state it has to do with experience to know how to maintain balance in

life.”

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CALLE

Calle described himself as an optimistic person. He believes that “If goals are set, even if

you fail along the way, you will start again but not from the beginning”. In common, most of the

entrepreneurs said that they learned in terms of economic effects.

DAVID

David considers having a sustainable business model as “ not a stepping stone but a

flagship” after that he was not successful with his first few ventures.

“I learnt that financials in a project is not just a stepping-stone but flagship.”

ERIKA

After Erika had to close her business down, she believed that she should take longer time

to consider her decisions carefully before making final decisions so the outcome might be

positively different.

“I learnt to consider my decisions a little longer before making them.”

“I now know what is important and what I should spend time on. I did not know that

before.”

FREDRIK

Fredrik also felt that he learnt in terms of economic effects as he realized that securing

supply chain is the most important thing in that field. In addition, he commented from a

psychological perspective that “getting out of your comfort zone” is important to move ahead in

business and not miss other opportunities along the way. He also emphasized that having a

strategic partners in business is much better than competing with them as business rivals. None

of the respondents could say that they had any physiological learning outcomes.

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“I realized through this experience that securing supply chain properly is very

important.”

“I learned how to get out of the comfort zone to see the opportunity around you.”

WHETHER OR NOT ENTREPRENEURS APPLY LEARNING OUTCOMES

Respondents were asked if they believed that there were any learning outcomes they can

implement in their current ventures. They were also inquired if it is possible for them to fall for

the same mistakes, failures again despite the lessons learned and if any of these failures were

beyond their control. This is for developing a deeper understanding how entrepreneurs apply and

utilize learned lessons in their successive ventures. The majority of respondents believe that the

same thing could happen again due to the external factors affecting their entrepreneurial projects.

David, for example, explained that he could make the same mistake again; however, he would

have dealt with it in a more mature way and try to teach people around him what he learned.

“By rethinking your own mistakes or failures, you have the possibility to help other

people relearn.”

Erika also reported a similar outcome as she claimed to have learned to take time in making

decisions and read it throughout. Despite being aware of her problem, she admitted that she

occasionally is as quick in making decisions now as before.

“I am very careful when making a decision but I am still hot-headed and choose quickly

when I forget.”

Half of entrepreneurs managed to implement their learned lessons from their past failures

into their subsequent entrepreneurship. David learned to always create a new venture with

business model in order to sustain it in a long run.

“Now, I will always start a company with business model.”

“I now always prioritize financial for a sustainable growth. I have integrated revenue

model in my projects and it is working well.”

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In addition, Anders and Fredrik are able to do so. Anders has changed his perspective working in

team. This eases up problems in group communication and collaboration for him.

“When I work with others, I see myself less I and more we.”

“I learned the importance of team. I listen to what others have to say and respect their

ideas”

Fredrik also turned the former competitors of his old company to be partners of his new company

when he decided to re-enter into the same business.

“Failure made me see things from different perspective; Business rivals can be our

strategic partners in this very niche market.”

On the other hand, Calle who did not apply any learned lessons actually made the same

mistake again in a similar situation in the respect of his previous failure that he described. At the

time of the interview being conducted, he is working on a project with a team that were formed

among friends due to the convenience and he was not even expecting to “pull it through

together”; however, he once again saw it as gaining experience.

“I did not expect the team to really pull it through in my current project but I didn't mind

I took it as a learning experience.”

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DISCUSSION

The previous finding results are interpreted and discussed in this section. Then, the

observation and reflection are linked to theoretical insights within the aforementioned literature

review in order to answer the research questions.

FAILURE UPON ENTREPRENEURS’ EXPERIENCES

When being asked what failure is, each respondent expressed their opinions differently

from action-oriented notion like “quitting an entrepreneurial life” to abstract concept such as “the

fear that is needed to overcome” basing on the statements from David and Anders respectively.

However, the deeper investigation revealed that failures described by entrepreneurs are not the

same as failures they had actually experienced. When every respondent started to elaborate on

failures they had faced in their projects, the descriptions sometimes are dissimilar with the

definitions they previously provided. For instance, Calle responded that entrepreneurial failure is

“a lack of scalability” but his detailed answer suggested that the failure in his first

entrepreneurial project is “an incompatible founding team”. This conflict demonstrates that the

real failure entrepreneurs experienced can be differed from failure they had perceived.

With the regard to failing experiences each respondent described, failures reported by all

of them were connected to their goals. This can be clearly seen in the case of Anders. His goal is

to create a co-working space for social entrepreneurs and he said the failure occured when the

bad collaboration within his team made sponsors change their minds and no longer support

hosting that co-working area. The correlation between failures and goals is comparable to 31

findings by Ucbasaran et al.’s (2010) that failure is subjected to change by personal goals of

entrepreneurs. No matter what cause of failure is – whether it is a mistake like “starting a project

without a business model” in David’s case or a misfortune like “an unexpected divorce of

investor that made him disregard the project” in Beatrice’s case, failure occurred when the

entrepreneurs received negative outcomes from their entrepreneurial endeavor (Cannon &

Edmondson, 2001) and realized they could not achieve the goals so they decided to end such

initiatives (McGrath, 1999). This also aligns with our definition that entrepreneurial failure

happens when an entrepreneur is unable to accomplish the goals and discontinue the actions

pursuing them.

FROM LEARNING TO KNOWLEDGE

Although none of respondents would like to fail in their entrepreneurial projects, they

unfortunately did. In fact, some of them even anticipate and also prepare to learn from failure in

their business venture. One of the respondents described his failing experience as something that

he was “looking forward to” and another one expressed that he felt “challenge” and

“enthusiastic” because he saw the failure from the bright side that would lead him to better

outcomes in the end. According to Calle’s point of view, he stated “If you set the goals, even if

you fail along the way, you will start again but not at from the beginning. It helps to move

forward”. This is consistent with McGrath’s (1999) indication that failure is unavoidable but can

be deemed as practical learning opportunity.

During the learning process, all of respondents reflected from and coped terrible failing

experiences. Upon their reflections, they focused on what went wrong and how to overcome

undesirable consequences. The causes of failures attributed by the respondents can be classified

into three groups.  First and foremost is dominant internal cause; Anders’ failure is put in this

group because he had reasoned it as “lack of experience” which then affected decisions from

external factor to “involve experts in the project“. The second type is dominant external reason

as for David listening to “old school” thinking that affected his decision, an internal factor, to not

implement a proper business model into his project; thereby, that venture failed financially. The

last type is that both internal and the external factors are the causes of failure but both of them

32

are unrelated to each other. This type can be seen in the case of Calle. His personal decision not

choosing a team that complimented each other was part of the fail but the external factor of the

suppliers not being consistent with quality was another unrelated cause. Both internal and

external reasons for their failures are comparable to Cardon et al.’s (2011) characterization of

causes of failure into mistakes and misfortunes. Internal factor can be deemed as mistake that

entrepreneurs should have been able to manage and manipulate while external factor can be

deemed as a misfortune that is beyond the control of the entrepreneurs. Their positive attitudes

toward failure mentioned above help them to be able to reflect on their deficiency and capable to

identify by themselves on what went wrong on their previous entrepreneurship. Learning through

failure reflections (Politis & Gabrielsson, 2007) and the ability to specify causes of failure make

entrepreneurs step closer to fail forward in their endeavor (Shepherd et al., 2009).

Every respondent did not only reflect on causes of failures but also on the consequences.

However, entrepreneurs must be able to cope with the aftermaths besides reflecting on them.

Otherwise, such consequences would obstruct entrepreneurs to move on either with their

entrepreneurial lives or back to employment field (Singh et al., 2007). The framework from

Singh et al.’s (2007) research is used categorizing consequences into economic, social,

psychological, and physiological aspects. Overall, the most crucial consequences of respondents’

failures lie within economic aspects with some effects toward their social lives and

psychological. However, none of them suffered terribly from those economic losses or put

themselves in any substantial personal debts from their venture failures. The respondents

describe their ventures to have “less potential” or  “loss of investments” and the possibility to

face “difficult to move ahead”. Due to the fact that the size of business ventures of each

respondent is relatively small, the weight of economic loss is not as severe as the collapse of

tycoons. Moreover, none of respondent reported any signs of physiological effects from failures.

By analyzing respondents’ coping strategies in accordance to Drnovšek et al.’s (2010)

methods: problem-based coping strategy and emotion-based coping strategies, the results show

that respondents as in Singh et al.’s (2007) findings mostly dealt with problem-focused coping

strategies which deals with the financial aspects of the failure, such as “thinking of alternative

financial support” and “focusing on balancing quality and profits to improve quality” We also

found that experienced entrepreneurs tend to use problem-based coping strategies by effectively

addressing economic aspects which results in well being and positive venture performance.

33

Emotion coping examples was “learn to apologies” and “reflect and not overreact towards

failure”. Another interesting point is that none of respondents experienced the physiological

consequences of failure; this might also be a positive effect from the fact that all of respondents

were able to cope from the failure. Furthermore, their optimistic thoughts toward failure such as

“failure is just a part of my learning process” or “the side project that we could not carry out this

time” may be the reasons why all respondents easily cope with their failures as suggested by

Politis & Gabrielsson (2007) that positive attitudes would help entrepreneurs move forward.

Once entrepreneurs had reflected on their failures and coped with the hardships, they

were able to draw the lessons from that experience. The learned lessons they gained through the

learning process was as follows:

Anders – Communicating and collaborating within team

Beatrice – Preparing alternatives for every step in entrepreneurship

Calle – Forming a team from those who have complementary skills to each other

David – Incorporating business model when start a new

Erika – Taking time to analyze all options before making a decision

Fredrik – Turning indirect competitors into strategic partners

The above learning outcomes are sensible lessons each entrepreneur obtained directly by

reflecting and coping from failures; however, these lessons have not yet been applied at this

stage. In relation to Burgoyne and Hodgson’s (1983) framework, this indicates that every

respondent have reached level one of learning.

IMPLEMENTING LEARNING OUTCOMES IN SUBSEQUENT ENTREPRENEURSHIP

According to the previous section, it can be said that all of respondents learned from

failure and drawn beneficial lessons out of it. Nonetheless, Shepherd (2003) argued that the

learning is neither immediate nor automatic. The true learning from failure requires both

reflection and application (Shephard, 2003; Shepherd et al., 2009; Ucbasaran, 2011). The

researchers have to examine further if entrepreneurs actually implement such lessons in order to

answer the first and utmost research question, “Have the entrepreneurs been able to apply what

they learned from failure?” Even though all of respondent reflected on their failures, we noticed

34

that half of respondents did not apply their learning in new ventures even they all reported the

learning outcomes.

The following three entrepreneurs are those who did not apply what they learned from

previous failures to subsequent ventures. In fact, one of them even realized that he did not do so

during the interview when he was aware that he made the same mistake twice. Beatrice was “rely

only on one individual” to get her project funded; nevertheless, she is still reaching potential

investor one at a time. Calle “found himself in the same situation again” in building the founding

team that was not complementing each other due to the fact that he “did not know team well

when the business was started” and fell for the same pitfall twice. Even more, Calle seems to

carelessly ignore to apply the lesson he previously learned as he replied "I did not expect the

team to really pull it through in my current project” when he talked about his team in his present

project. Erika admitted that her personal traits are “hot-headed” and “thinking on her feet” that

usually causes her to “making decisions too fast”. Although she is aware of her flaws, it is very

difficult for her to apply changes in her personality instantly. In conclusion, all of them did not

implement the obtained knowledge into their subsequent entrepreneurship and sometimes made

similar decision they previously made in their current projects. Thereby, they stop their learning

at level one (Burgoyne & Hodgson, 1983) and clearly do not benefit from their past failures.

Nonetheless, the other three respondents who reflected upon their failures and took their

learned lessons into actions stated the positive effects upon the applications. Anders learned “not

to blame others” and “always listen to what others have to say”. He implemented these learning

outcomes by “using we instead of I and us instead of me” in which make him putting others over

himself resulting in better experience working with other people. David learned to “prioritize

financial” in his entrepreneurial projects; therefore, he later on ensures that he “always apply

business model” to generate financial incomes in order to scale and sustain every business he

created. Fredrik learned that “business rivals” can turn into valuable business partners; hence, he

partnered up with them when his family reopened a new company so they gain benefit from

growing and strengthening business network. The results of this findings showed that failure

could push the entrepreneurs forward if they reflect and apply lessons they have learned

(Shepherd, 2003; Shepherd, 2009; Shepherd et al., 2009); thus, knowledge implementation is the

key to lead entrepreneurs out of failure to success.

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To have a closer look on this issue, every cause of failure identified by those

entrepreneurs who do not implement the learning outcomes is partially resulted from external

factors. As a consequence, such entrepreneurs do not take actions from their side to prevent the

repeating faults. Because of a lack of knowledge implementation, these entrepreneurs did not fail

forward from their mistakes (Cope & Watts, 2000; Shepherd, 2003). This result indicates that not

all of entrepreneurs actually apply learning outcomes although every one of them already

reflected on their past failures. It is also backed by Ucbasaran et al.’s (2010) statement that

individual who experience failure can process and learn from failure differently.

EXTENT OF LEARNING OUTCOME IMPLEMENTATION

After the researchers found out that only half of respondents indeed apply learning

outcomes in their subsequent entrepreneurship, we must investigate deeper “to which extent the

entrepreneurs have implemented their learning outcomes?” in order to answer the second

research question. For that reason, only the cases of Anders, David, and Fredrik are qualified for

discussion in this section. Their knowledge implementations are interpreted and measured in

comparison to learning characterization by Burgoyne and Hodgson (1983) as follow:

In the case of Fredrik, he “was looking at the bright side of what happened” and stopped

struggling in a niche market solely. He changed his business strategy by being partners with his

former “business rivals” increase both of their capabilities to capture the market share. In order

to do so, Fredrik shut down his old company “as soon as possible to work fully on new business

model” under a new company. His actions prove that Fredrik transferred what he learned to his

subsequent entrepreneurial endeavor by applying it as a new business model. As a result, his

knowledge implementation can be considered as a learning level two regarding to the framework

of Burgoyne and Hodgson (1983).

In the case of Anders and David, their lesson implementation is classified at level three of

learning (Burgoyne & Hodgson, 1983). This is because the two of them have learned crucial

lessons that cause vital impact on both personal and professional levels (Cope & Watts, 2000).

David learned that “the old-school belief” that social enterprise should not gain any profits is a

false belief and impractical. His perception toward social entrepreneurship was completely

reframed and he now realizes that every entrepreneurial project needs a business model in order

36

to sustain and grow. Because his understanding has changed and he integrated business model

into all of his current projects, his ventures are growing sustainably. Having discussed how

David benefits from his failure, Anders used the learning lessons to improve himself and his

projects as well. His attitudes toward teamwork were permanently disrupted; he sees himself

“less I and more we” when working in a group. Afterward, his successive works with colleagues

goes smoother because he opens his mind to listen to other people’s opinions and respect their

ideas.

There is another interesting point from this finding that is worth to point out. Beatrice and

Erika have over five years of entrepreneurial experience and have faced many failures yet they

still did not apply every learning lesson to their subsequent ventures whilst Anders and David

who have recently become entrepreneurs did. This observation can determine that the number of

year of experience in entrepreneurship and the number of failures entrepreneurs faced do not

have any effect to make entrepreneurs implement learning outcomes.

37

CONCLUSIONS AND IMPLICATIONS

Considering the experience of failure that each single entrepreneur expressed herein,

failure is diversely perceived with respect to distinct goals of each individual. This outcome is

similar to the definition of failure that it is subjectively the discontinuance of entrepreneur’s

goals (McGratch, 1999; Ucbasaran et al., 2010). In this study, every respondent was able to

identify factors that caused failure and elaborate on learning outcomes they gain through their

reflections and coping experiences. However, deeper investigations demonstrate findings that not

all of them actually implemented their learning outcomes. As mentioned at the beginning,

learning outcomes from failure would become useless if entrepreneurs do not actually apply

what they have learned through their practical experiences. Our research vividly shows that

failure alone would not automatically assist the entrepreneurs or cause positive effects. This also

complemented by Shepherd’s (2003) study that suggested entrepreneurs, who would learn from

business loss, must be able to identify the causes of failure, reflect on them, and implement the

extracted lessons in their next entrepreneurial actions. Only entrepreneurs who do so will truly

benefit from failure and fail forward. A lack of learning implementation could deplete the value

of high-priced lessons intrinsic in failing experience and jeopardize the opportunity to develop

both entrepreneurs and their ventures. However, there are various extents of lesson

implementation. Entrepreneurs may apply the learning outcomes specifically to certain projects

or implementing those lessons at personal level for their own improvements. This study also

highlights the consequences of failure and coping strategies in which mainly occurs to

economics aspects of entrepreneur lives comparing to social and psychological aspects. Within

38

the early stage of venture and small size of firm, the business loss does not leave any

physiological costs to any respondents. Another important implication from this study is that the

number of failures entrepreneurs have been through and the years of experience they have

worked in the field do not correlate with repeat entrepreneurs using this knowledge in subsequent

ventures. Because failure could be a double-edged sword that propels entrepreneurs from getting

back on their feet and succeed in their future entrepreneurial endeavors (Ucbasaran et al., 2013),

it is crucial to comprehend the phenomenon of entrepreneurial learning process and lessons

implementation to ensure that when entrepreneurs fail, they would be able to fail forward.

LIMITATIONS

The authors recognize there are limitations in this research; the most significant limitation

is how the participants identified failure. The definition used by the researchers is in accordance

with McGrath (1999) and Ucbasaran et al. (2010) that focus on the entrepreneurs’ personal

perception of the event of failure rather than venture failure. The research; therefore, does not

identify and categorize reasons for failure, as it would be if it were identified more commonly

with focus on bankruptcy and insolvency of a firm or a business (Shepherd, 2003; Zacharakis,

Meyer & DeCastro, 1999).

Second limitation was the method of sampling used in conducting this research because

convenient and purposive sampling method has its disadvantages for the result of this particular

study. One possible outcome is that the research has systematic bias (Mackey & Gass 2005),

which results in skewed results. Dörnyei (2007) Researchers have chosen participants to meet

certain practical criteria, likely to be biased and subjective of the researcher ensured balance of

group.

Another limitation was the difficulty of verifying entrepreneurs learning outcomes as it

was reported and told by entrepreneurs themselves which could allow recalling bias to arise from

the time gap from then and when the interview was conducted (Podsakoff & Organ, 1986).

However, researchers have taken in consideration that the researched entrepreneurs were

explaining and filtering everything through their own personal framework of beliefs and values.

This means that it is not believed by the authors that there are any absolute truths, but that reality

is subjective and that there are multiple points of view that can be understood by examining the

39

perceptions of the individuals. The researchers are also aware of the fact that participants’

backgrounds, opinions and beliefs influenced phenomenological standpoints. This effect were

limited through careful data preparation, coding, and interpretations, the results of this qualitative

analysis can therefore support the development of new theories, as well as validating existing

theories and provide descriptions of particular settings or phenomena (Weber, 1990)

Last but not least, the method of analysis in finding out which extent entrepreneurs

applied their learning outcomes can be prone to researcher bias. According to Schwandt (1994,

p. 18), “to prepare an interpretation is itself to construct a reading of these meanings; it is to offer

the enquirer’s construction of the constructions of the actors one studies”. This means that the

involvement of the researcher in the study shapes the knowledge resulted (Cassell & Symon,

2004), as the findings are based on their background, beliefs, values and personal backgrounds.

This limitation is addressed, according to Eisenhardt and Graebner (2007, pp. 30) through

“theoretical sampling of cases, interviews that limit informant bias, rich presentation of evidence,

and clear statement of theoretical arguments”.

Additionally, suggestion for further research is making a longitudinal study and includes

a larger sample group how entrepreneurs use what they have learned from failure and if there is

changes as they gain further experience. Another suggestion for further research would be to

research further into whether numbers of failures and years are insignificant in learning

outcomes on a larger scale to validate our research outcome.

40

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APPENDICES

Appendix A – Preliminary Interviewee Selection Questionnaire

1. Have you ever worked on any entrepreneurial projects and how long have you been an

entrepreneur?

2. Could you please provide more details on these entrepreneurial projects?

3. What are/is the project(s) that you are still working on?

4. Have you experienced failures from those inactive projects?

5. Did you learn any lessons from the failures?

6. Do the learned lessons benefit your current entrepreneurial project?

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Appendix B - Interview Questions

The purpose of this research is exploring the link between coping and learning in

entrepreneurial failure. We will explore what success and what failure is for entrepreneurs? How

they cope after failing in their venture creation? Did their previous failures contribute to any

learned lessons that can be implemented in their current entrepreneurship and to what extent?

1. Background or History

1.1 Can you tell me a little about yourself and your background in entrepreneurship?

1.2 Which ventures or projects have you started or worked on?

1.3 How long have you been an entrepreneur?

1.4 How much time did you spend on the project that failed, please think of one that particularly

affected your life?

2. Entrepreneurship

2.1.What does entrepreneurship mean to you?

2.2 What were the goals of your entrepreneurial project?

2.3 What does success mean to you in terms of entrepreneurship?

2.4 What does failure mean to you in terms of entrepreneurship?

3. Failure in Entrepreneurship

3.1 Can you describe how your project failed?

3.2 Could you please elaborate on the factors that caused the failure?

a) Internal factors

b) External factors

3.3 How did that experience make you feel in the aspects of?

a) Economic

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b) Social life

c) Psychological

d) Physiological

4. Coping with failure

4.1 From the four aspects above, how did you cope from that experience?

a) Economic

b) Social life

c) Psychological

d) Physiological

4.2 Do you think that you have benefited from your failures?

4.3 Apart from the effects toward the project, has failure changed you personally?

If yes, how has it changed you?

5. Present entrepreneurial project

5.1 Through previous entrepreneurial experience, how do you see yourself today as an

entrepreneur?

5.2 Despite the lessons learned, do you think there is a possibility to fail on the same mistakes

again?

5.3 Are any of these failure aspects beyond your control?

a) Economic

b) Social life

c) Psychological

d) Physiological

6. Future outlooks

6.1 Reflecting from your past entrepreneurial experience, what are the learning outcomes that

you can use as stepping stones to success for your next venture.

6.2 Have you been able to implement any of those lessons in your current entrepreneurial

project?

7. Suggestion

Is there anything else you would like to add?

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