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Chapter 1: Introduction
Activities of entrepreneurial nature are characterized by having great amount of risk and
uncertainty with increased chances of failure (Artinger & Powell, 2016; Baù et al., 2017; Lee et
al., 2011). The journey of entrepreneurship is not a venture paved with success and fortune,
rather it presents various risks. The success of these ventures cannot be promised as many
businesses crumble during the start-up stage while others fail after many years of progress.
Knight (2012) regards uncertainty as the defining characteristic of entrepreneurial activities
whereas, Schumpeter (2011) posits that creative destruction is an inevitable result of the
introduction of advanced products into the market. Consequently, failure becomes an inherent
attribute of the entrepreneurship process.
According to current studies, although failure is crucial to entrepreneurial activities, it
remains an under-researched topic (Detienne et al., 2014; Sarasvathy et al., 2013). A vital
implication in this regard is that in entrepreneurial activities, the failure of the business is
considered equivalent to the failure of the individual. However, it must be noted that in case of
an entrepreneur’s failure, the same business can be run by another individual successfully.
Alternatively, even if a firm fails, the entrepreneur behind that firm may go on to run successful
businesses in the future. Therefore, it is important to distinguish between the two failures and
establish that failure of the firm does not necessarily entail that the entrepreneur has failed
(Sarasvathy et al., 2013).
The attitudes of entrepreneurs toward uncertainty and failure shape the outcomes of their
business ventures. Considering failure as a central component of these business ventures can
enable entrepreneurs to be mentally prepared for the risk involved. In contrast, the fear of failure
and uncertainty not only obstructs success but also bars individuals from continuing these
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ventures. Such entrepreneurs often suffer from increased stress and lose confidence and
motivation when met with failure. Such an attitude often leads to the closure of businesses in
some cases, while many others may continue despite failure. To display such resilience
entrepreneurs must take challenges head-on, learn from delays and setbacks, develop their skills
to become better leaders, and ultimately achieve success (Brodsky, 2013). To remain determined
in one's entrepreneurial venture, it is important to regard failure not as a barrier but rather as a
learning opportunity. For resolute entrepreneurs, failure gives rise to the prospect of developing
better ideas to achieve business outcomes. It presents the opportunity for self-reflection and
evaluation of business practices which often leads to the development of better approaches to
overcome obstacles and ensure continued progress.
Entrepreneurs’ conceptualization of failure is important in determining their attitude
towards it. Historically, failure was considered synonymous with a distinct exit from the
entrepreneurial activity or the business venture (Wennberg et al., 2010). However, at individual
levels, an exit from the firm may not necessarily entail failure as entrepreneurs often exit the firm
to collect their investment or may retire to follow an alternative employment path (Detienne et
al., 2014; Wennberg et al., 2010). Such exits are, therefore, viewed positively rather than being
labeled as a failure. In contrast, when businesses exit due to low level financial operations, such
as, insolvency, it is often characterized as a failure (Detienne et al., 2014). Thus, it is important
to note that an entrepreneur’s exit from the firm is not a necessary criterion to establish failure.
Consequently, other factors must also be considered to establish what failure means in this
context. An analysis of failure at the firm level provides considerable clarity about the
relationship between failure and exit. Often firms are forced to exit when they become
financially unviable for business i.e., insolvency, or they might be closed down by the
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entrepreneur’s choice due to insufficient return on investment. Firms may also be shut down if
the assets are no longer worth any benefits (Coad, 2014). The concept of business enterprise exit,
therefore, captures a broader meaning of failure with some differences in the level to which the
business is economically impacted at the time of its closure.
Researchers have established failure as an integral part of any entrepreneurial activity.
According to Patel (2015), generally, 90% of startup businesses face failure and end their
operations. Although the rate of failure associated with entrepreneurial activities is high, nearly
20.1% of entrepreneurs retry and therefore, are labeled as serial entrepreneurs (Ucbasaran et al.,
2011). In making second attempts, learning from failure, and equipping oneself with the required
skills and knowledge is highly important (Parker, 2013). In recent years, entrepreneurial and
organizational research has focused greatly on the topic of failure (Artinger & Powell, 2016;
Cope, 2011). This shift in focus can be attributed to the learning opportunities that failure
provides to individuals along with the stimulation it creates for high-level learning outcomes. By
considering failure as a learning opportunity, entrepreneurs can gain deep insight about
themselves along with the knowledge about business failures and their relationship with the
external environment. It also creates a greater ability to cope with related problems preparing
entrepreneurs for future activities by helping them in identifying and assessing future business
prospects (Boso et al., 2019; Cope, 2011; Ucbasaran et al., 2011).
The research about learning from failure, however, presents certain limitations by
focusing on learning as an output of failure and ignoring the fact that learning is not a
spontaneous activity nor is it an automatic by-product of entrepreneurial activity (Shepherd,
2003a). Another limitation of the presently existing studies is that it lacks significant insight into
the lessons learned by entrepreneurs from failures, especially from the viewpoints of
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entrepreneurial leadership. By focusing on this underdeveloped research area, this study aimed to
study the lessons that entrepreneurs learned from failed business ventures and apply these
lessons to new business ventures.
Entrepreneurship in the Context of China
Over the last century, entrepreneurial activity in the context of China was not a popular
practice, however, in the past few decades, the trend has shifted with an increase in the creation
of innovative startups that are built out of opportunity rather than a mere necessity. Although
much of the research has focused on the best type of entrepreneurship and the degree of its
impact, it has been established that for developing countries like China, new ventures and “small
and medium-sized” enterprises can play a significant role in the country's growth. The navigation
of these entrepreneurial activities in China’s challenging market environment is an important
factor to consider, particularly in regard to the institutional regime (Ahlstrom & Ding, 2014).
According to Rosenberg and Birdzell (2008), in pre-industrial China, local rulers and
sovereigns exercised complete claim to all that existed within their lands, including any new
inventions. This resulted in regular confiscation of innovations by monarchs and local nobles in
return for very meager compensation. The same prevailed in imperial China whereby, the
Chinese people avoided the acquisition of conspicuous capital and investment in major projects.
As a result, potential proprietors often struggled to expand and grow their businesses. This also
hindered wealth accumulation for the funding of investments related to infrastructure and
industry. In republican China, entrepreneurs experienced considerable progress in the initial
decades of the 20th century (Ahlstrom & Ding, 2014). However, in 1949 the accession of the
Chinese Communist party led to certain reforms, making entrepreneurship legally suppressed.
The economy of China was struggling when the Four Modernizations were launched in 1978.
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These reforms were introduced by Deng Xiaoping and soon these became applicable to
households which allowed small businesses to cater to local goods requirements. These reforms
were central in creating an impetus for entrepreneurial activities in China (Y. Huang, 2008).
In recent years, entrepreneurship has resulted in significant financial gains and job
creation in China. In 2020, there were more than 140 million self-employed and small and
medium-sized enterprises which contributed more than 60% of the total GDP. These businesses
are also responsible for approximately 79% of new job opportunities and also contributed to
about 50% of taxable income. Approximately, 68% of exports can be attributed to the small and
medium enterprises and self-employed population of China. In 2020 alone, about 2.52 million
companies were registered, estimating an increase of 22,000 enterprises each day. The Chinese
entrepreneurial sector has experienced a great boon over the last 35 years; rapidly growing from
zero to approximately 48.3 million registered private businesses at the end of 2021 (OECD,
2022).
The government’s proactive approach to ensuring the sustainability of businesses in
China is reflected in the measures put in place to develop innovation. These include heavy
investments in the progress of the research and development sector, provision of tax incentives,
and creation of investment opportunities for local businesses. As a result of these efforts, 25% of
the adult population of China are entrepreneurs which is double than the number in the United
States. The world’s 18th richest man, Jack Ma, is one of the most renowned entrepreneurs in
China. As a creator of Alibaba, Jack Ma is a self-made billionaire who runs an online B2B
marketplace. This business provides service to nearly 80 million members in about 240
countries. Although the example of Jack Ma presents one end of the spectrum, there are still
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numerous barriers that hinder the advancement of entrepreneurial sector in China (Bridgestock,
2021).
The Global Entrepreneurship Monitor report for China included the assessment of its
business environment. Based on the June 2019 report data, the physical infrastructure of China
attained the highest evaluation of 7.7 points on the 9-point rating scale. In the internal market
dynamics of China rated at 6.8 points, whereas overall the country ranked 4th among 54 regions
and countries (Global Entrepreneurship Monitor, 2022). The demographic data of China's adult
population involved in startup entrepreneurial activities revealed that approximately 10.6% of the
respondents between the age group 18 to 24 years were either in the process of starting their own
business or had a start-up enterprise that was less than 42 months old (Statista, 2022).
Statement of Problem
The establishment and development of an entrepreneurial activity require great effort
along with the investment of a considerable amount of resources, time, and interest. The high
level of involvement of the entrepreneurs in their business often creates strong emotional bonds
whereby, it becomes a part of the entrepreneur's identity. Failure of such entrepreneurial
businesses not only leads to financial losses but may also result in emotional damage that may
impact the entrepreneur for years (Zou, 2015). The problem of failure, therefore, has great
implications for the entrepreneurs’ future endeavors, however, the social, psychological, and
financial cost of failure is a rather under-researched area of study.
A failed entrepreneurial activity may have underlying reasons which may range from
individual attributes or circumstances to industry-wide problems such as financial crises.
However, often unforeseen events may also impact businesses giving rise to numerous learning
opportunities. The COVID-19 pandemic is one such event, which although did not have an
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economic origin but it brought the world to a standstill. Starting from Wuhan, China in
December 2019, the pandemic eventually spread globally and severely compromised the world
economy. It impacted businesses worldwide, irrespective of the size and nature of the enterprise.
The impact of the COVID-19 pandemic on entrepreneurship remains to be a topic requiring
research however, it can be regarded as a double-ended sword, as on one end it boosted
innovation in certain industries while on the other end it severely hit others (Feng, 2021).
Research indicates that the role of entrepreneurs is central to the economic recovery of
societies from major disruptions such as the pandemic. During a crisis, the entrepreneurs’ ability
to identify and benefit from opportunities is a reflection of their determination. Innovating
operations during such events lead to the facilitation of new work patterns and increased
learning. However, the efficiency and impact of the entrepreneur's actions are dependent upon
the context which includes the governmental institutions, market volatility, and access to
resources. In China, entrepreneurial innovation and resilience were displayed by many
entrepreneurs through the use of digital technology and network relationships. These innovations
not only help in overcoming the immediate disruptions caused in 2020 but also paved the path
for evolving and adjusting to the new normal, which is defined by changed behaviors and
capabilities. In contrast, the disruptions caused by the pandemic also lead to the exit of many
firms and individuals from the entrepreneurial industry. It is, therefore, imperative to establish
the leadership lessons learned from the failure caused by the pandemic as exploring
entrepreneurship under the impact of crisis may yield lessons for recovering the flailing economy
post-crisis (Meyer et al., 2021).
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Purpose Statement
This qualitative phenomenological study is based on the failure incidents of entrepreneurs
in China. By exploring their experience of failure, especially during the pandemic, this study
establishes the leadership lessons learned from failure. Overall, the present study is driven by
three purposes as outlined below:
i. By exploring the failure experiences, the study aims to reveal the lessons learned by
entrepreneurs. Hence, the first purpose of the study is to present an alternative viewpoint
on failures by seeing them as chances for entrepreneurial growth and learning.
ii. The research aims to explore how the lessons learned can be applied to entrepreneurial
ventures. It seeks to pinpoint the actions taken by entrepreneurs to lead their businesses
through failures. So, the next objective of the study is to offer actionable strategies for
existing entrepreneurs to effectively handle challenges and setbacks.
iii. Lastly, the study aims to share best practices drawn from the experience of established
entrepreneurs with potential entrepreneurs. The knowledge about failures and practical
suggestions offered are highly beneficial in helping new entrepreneurs prepare and learn
how to deal with potential failures in their own ventures.
Research Questions
According to Creswell (2014), in a qualitative research study, the research questions are
designed to be open-ended, evolving, and non-directional. Beginning with a question word such
as what or how, the research questions not only restate the purpose of the research but also
explore the central phenomenon (Creswell, 2014). This study uses interviews with entrepreneurs
in China as a means of data collection to explore the phenomenon of failure and learning gained
to improve leadership abilities. The following research questions guide this study:
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• Research Question 1: How do entrepreneurs explain the reason of their failure?
• Research Question 2: What are the psychological, emotional, social, and financial
impacts of failure?
• Research Question 3: What lessons can entrepreneurs learn from failures?
Methodological Approach
This study employs a phenomenological approach as it tries to describe the meaning of a
specific phenomenon for several individuals based on their real-life experiences, i.e., the
phenomenon of entrepreneurial failure and leadership learning to improve capabilities. The
phenomenological research design enables the formulation of composite descriptions based on
the what and how of a phenomenon by gathering data from individuals who have lived that
experience (Creswell, 2014).
To gather data, a sample of 8 entrepreneurs was selected using the criterion sampling
technique which is based on the recognition and selection of information-rich cases. Based on
the requirement of the study, various criteria can be set for sampling. For the present research, an
important criterion was the selection of business owners owning an enterprise for at least three
years. The other criteria included the employment of 5 employees and an experience of failure in
their venture.
For this study, the most commonly used qualitative data collection tool was employed
i.e., a constructed semi-structured interview (Willig, 2001). The interview guide provided the
researcher with the direction for discussion and was based on a list of open-ended questions that
aligned with the four research questions (Moustakas, 1994). Significant quotes and statements
were identified from the interview transcripts to establish an understanding of entrepreneurial
failure and leadership lessons learned. Based on common themes, the collected data was
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organized. This allowed the development of clusters of meaning based on similarities of
experiences common across all transcripts (Creswell, 2014). These common themes were
analyzed to explore the answers to the research questions.
Researcher Assumptions
The key assumptions made by the researcher in this study are as follows:
• Failure is a common phenomenon that is experienced by everyone irrespective of the path
they choose.
• Failure is a phenomenon that can be faced by entrepreneurs across industries, backgrounds,
levels of knowledge, skill, and experience.
• Failure serves as an opportunity to reflect on current entrepreneurial activities and to learn
from them.
• The sample of entrepreneurs selected for this research would be able to recall and effectively
share their experiences of failure, especially during the pandemic.
• The selected sample of entrepreneurs would share significant insight and lessons learned
from their past failures.
• Since an entrepreneur is not only the business owner but also a leader who leads the
employees, the selected entrepreneurs will help consolidate leadership learning outcomes
from failure experiences while also keeping in view the pandemic situation.
• The lessons learned by these entrepreneurs had a significant contribution to the development
of their leadership knowledge, skill, and capabilities and guide future actions.
• As interviews are the main data collection tool for this study, it is assumed that the
interviewees would respond to the questions with complete honesty.
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Theoretical Framework
This section presents the definitions of the key terms along with the theoretical
framework to guide research.
Entrepreneur
According to Hisrich (1990), an entrepreneur is someone who demonstrates initiative and
creative thinking, is able to organize social and economic mechanisms to turn resources and
situations to practical account, and accepts risk and failure. An entrepreneur is a business owner
who establishes and develops a business (Zou, 2015).
Entrepreneurial Leadership
A specific type of leadership that influences others to manage resources strategically in
pursuit of entrepreneurial opportunities (Ireland et al., 2003a). This leadership embodies the
characteristics of successful leaders and entrepreneurs (Wang et al., 2012). This form of
leadership is highly effective in highly competitive work environments characterized by
increased challenge and uncertainty (Bagheri & Pihie, 2011b). Entrepreneurial leadership can be
acquired and developed through experience in entrepreneurial activities (Kempster & Cope,
2010).
Failure
In the broadest sense, failure occurs when the outcome deviates from what is expected or
desired by the entrepreneur (McKenzie & Sud, 2008). In the narrower sense, it can be regarded
as a failure as a result of insolvency or bankruptcy (Cotterill, 2012). It can also be defined as the
cessation of involvement in a venture because it has not met a minimum threshold for economic
viability as stipulated by the (founding) entrepreneur (Ucbasaran et al., 2011). Failure is also
synonymous with a distinct exit from the entrepreneurial activity or the business venture
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(Wennberg et al., 2010). It may occur at the individual or firm level. At individual levels, an exit
from the firm may not necessarily entail failure as entrepreneurs often exit the firm to collect
their investment or may retire to follow an alternative employment path (Detienne et al., 2014;
Wennberg et al., 2010). Whereas firms are forced to exit when they become financially unviable
for business i.e., insolvency, or they might be closed down by the entrepreneur’s choice due to
insufficient return on investment. Firms may also be shut down if the assets are no longer worth
any benefits (Coad, 2014). Firm exit, therefore, captures failure in a broader sense with some
variance in the extent to which the business is economically unviable at the time of its closure.
Entrepreneurial Learning
Entrepreneurial learning is a facet of entrepreneurship that deals with learning at the
individual as well as organizational levels (Harrison & Leitch, 2005a). Entrepreneurial learning
is characterized as essentially cyclical, suggesting learning loops that emphasize the importance
of experience and learning by doing, and the value to the learning of the critical event – knowing
what works and does not work in preparation for the next time (Cowdean et al., 2019).
Entrepreneurial Action
Entrepreneurial action refers to behavior in response to a judgmental decision under
uncertainty about a possible opportunity for profit (McMullen & Shepherd, 2006). The
motivation behind such entrepreneurial actions is self-interest which is only rewarded to the
extent that it creates a perceived contribution over existing solutions to current problems
(McMullen, 2015).
Leadership
According to Rost (1991), leadership is an influence relationship among leaders and
followers who intend real changes that reflect their mutual purposes. Moreover, leadership can
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be defined as a process in which a person or persons inspire(s) and motivate(s) the people to
meet the shared goals or objectives which may be changed or added as per the needs and
challenge (Malik & Azmat, 2019).
Phenomenology
Phenomenology explores the structures of consciousness as experienced from the first-
person point of view (Smith, 2015). It is a qualitative research approach that aims at studying the
lived experiences of several individuals regarding a phenomenon (Creswell, 2014). By revealing
the meaning attached to these individual experiences the researcher tries to create a description
of the what and how of the phenomenon (Creswell, 2014). It is also defined as the study of
human experience and of the ways things present themselves to us in and through such
experience (Sokolowski, 2000).
Qualitative Research
Qualitative research is a process of inquiry that is aimed at understanding a social or
human problem based on building a complex, holistic picture, formed with words, reporting
detailed views of informants, and conducted in a natural setting (Creswell, 2014). In contrast to
quantitative research which focuses on large sample sizes, qualitative research emphasizes an in-
depth understanding of a limited number of cases. It is characterized as being more flexible,
unstructured, and descriptive as it explores feelings and perceptions and not just hard facts.
Significance of the Study
This qualitative phenomenology is significant as it explores various important dimensions
of entrepreneurship. The results of this study may significantly impact entrepreneurs’ perceptions
of failure and its impact on future practice. Moreover, this research might develop the
knowledge, skills, and capabilities of entrepreneurial leaders equipping them with ideas to face
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failure and especially the importance of innovation in a drastic situation such as the pandemic.
This study has important implications for the practice, leadership, and education of
entrepreneurs.
In terms of practice, the results of this study may provide important insight into the
overall field of entrepreneurship. The failure experiences of entrepreneurs and their resilience in
such situations may inspire prospective entrepreneurs to gain important lessons which can be
applied to their practice. It may provide a roadmap for newcomers to survive and even thrive on
their entrepreneurial journey even when faced with obstacles.
This study also might significantly contribute to entrepreneurial leadership. By reporting
on the stories of leadership development through failure, other leaders may be prompted to
reflect on their practices and alter their perceptions and attitude toward failure. It may enable the
business leadership to view failure as an opportunity to reflect and develop, thereby improving
future practices. Furthermore, the narration of failure experiences resulting from the pandemic
might enable other leaders to deal with drastic situations more effectively. By recording the
entrepreneurial innovation and resilience displayed by many entrepreneurial leaders during and
after the pandemic, this study might pave the path for other leaders to evolve and adjust to the
new normal. Moreover, the leadership lessons learned during the pandemic might enable leaders
to discover innovative solutions for recovering from the flailing economy post-crisis.
Lastly, by comprehending failure and its influence on an entrepreneur’s leadership
progress, valuable understandings can be established for entrepreneurial education. New
entrants, prospective entrepreneurs, and current businessmen, all might benefit from this study.
This benefit would be gained by learning about other people’s practical experience in the field.
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This learning might help in increasing knowledge and avoiding mistakes to gain success. This
study might inspire others to transform their failures into the ultimate opportunities for success.
Limitations and Delimitation of the Study
A notable delimitation of this study is its sample size and sampling technique. By
limiting the number of participants of this study to 8 entrepreneurs, the researcher aimed to
purposefully select the participants who have experienced entrepreneurial failure. Additionally,
the participants of this research belonged to the professional and personal network of the
researcher. Moreover, this comparatively small sample size would enable the researcher to gather
in-depth data. By opting criterion sampling method, the researcher has ensured that all
participants have an experience of the phenomenon.
A possible limitation of this study can be the bias that may occur during the process of
data collection. Since this study employs interviews as a primary source of data collection, the
probability of human error in data recording and interpretation can be higher. These errors may
also arise due to misunderstanding on part of the interviewee. To reduce the probability of bias,
first, the researcher has clearly stated the key assumptions. Moreover, the data collection process
is designed to reduce errors by employing a digital recorder to record all interviews and emailing
the transcript of each interview to the interviewee for the purpose of verification.
Summary
The entrepreneurial journey is not characterized by smooth success and fortunes rather it
is characterized by high levels of risk and uncertainty with increased chances of failure. While
some obstacles are foreseen, others such as the COVID-19 pandemic are not only unforeseen but
also may have wide-ranging impacts. These obstacles or failures can be viewed as an excuse to
give up or as an opportunity to reflect, learn, and innovate.
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Based on the assumption that failure is an opportunity to learn and improve, this
“qualitative phenomenological study” explores the lived experiences of entrepreneurs in China
with an aim to reveal the lessons learned by entrepreneurs when faced with failure. The study
further aims to discover how the learning transformed the leadership practices of these
entrepreneurs to handle problems and setbacks. Furthermore, the study shares advice from expert
entrepreneurs with potential businesspeople with the aim to prepare them for future failures. This
qualitative study employs in-depth interviews as a primary data collection tool from 8
entrepreneurs purposefully selected through criterion sampling. Moreover, the researcher’s
assumptions about the study have been clearly outlined along with the delimitations of the study.
The significance of the study in terms of its contribution to the field of entrepreneurship research
and development is also outlined as it impacts practices, leadership, and education.
With the conclusion of Chapter 1, the next chapter follows with a detailed discussion of
the existing scholarly literature. By establishing a relationship between the various constructs of
this research, a theoretical and conceptual framework will be outlined. The literature presented in
Chapter 2 will be divided according to the theoretical constructs.
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Chapter 2: Literature Review
Introduction
This chapter of the dissertation provides an overview of existing literature while
examining, synthesizing, and evaluating the different constructs relevant to this study to design a
theoretical framework. The review of literature is divided into six themes i.e., entrepreneurial
challenges specific to China, and the impact of the pandemic on entrepreneurs, entrepreneurship,
leadership, impacts of entrepreneurial failure, failure and entrepreneurial learning.
The first section explores the entrepreneurial challenges specific to China. Over the past
few decades, entrepreneurship has evolved in China with a greater trend toward new startup
businesses. The challenges faced in setting up and maintaining these small and medium-sized
enterprises (SMEs) will be explored.
The second section deals with the effect of the COVID-19 pandemic on entrepreneurs.
The recent pandemic brought the world at the standstill and adversely affected businesses
globally. In this regard, the impact on entrepreneurial startups will be discussed.
The third section investigates the background, entrepreneurial process, and characteristics
of entrepreneurs. An overview of the evolution of theories with time, with a shift from the 17th
century’s economic perspective to a behavioral and transdisciplinary one prevalent in the 21st
century, is explored along with its social and organizational implications.
The fourth section is related to Leadership which aims to explore the various definitions
of the construct in terms of a process rather than an action influencing others. There is a wealth
of literature on leadership, and this part discusses leadership styles, traits, and approaches along
with situational leadership and contingency theory.
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The fifth section probes into the concept of failure specifically in the context of
entrepreneurship as failure are regarded as an integral part of any entrepreneurial activity. The
psychological and emotional impacts of entrepreneurial failure are elaborated.
The sixth section deals with entrepreneurial learning that occurs as a result of failure. As
a driving force behind entrepreneurs' learning and progress, failure plays an important role both
at the individual and organizational levels. This section explores the various aspects of learning
and its relationship with the entrepreneurial process.
Entrepreneurship Challenges Specific to China
Entrepreneurship has significantly developed in China over the past two decades as a
result of the Chinese economic reforms that have contributed to the transformation of the
Chinese economy and society (Bruton et al., 2010). It has enabled the success of many private
SMEs while unleashing China’s entrepreneurs in every segment of Chinese society, contributing
to the economic development of the country (X. Huang, 2016). However, various challenges
have been identified that impact entrepreneurial activities in the context of China. These
challenges are related to financing constraints, squeezed profit margins, and innovation
difficulties (Murong et al., 2019).
Financial capital is one of the most important resources required by the businesses to set-
up and subsequently operate within the market. Business performance is significantly impacted
by the kind of financing they use when establishing a start-up (Cassar, 2004). For instance, it has
been claimed that the amount and the sources of startup financing can both be extremely
important to the company's success (Florin, 2005). The amount of capital required has been
extensively studied. It is commonly known that the lack of funds contributes to the risk of
innovations that has such a negative influence on new enterprises (Marlow & Patton, 2005).
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Additionally, the accomplishments of a business venture is also associated with the source of
financing (Christensen & Raynor, 2013). In this regard, private SMEs face major constraints in
accessing and securing financing from the banking sector. Therefore, limited access to credit
sources has been identified as a central institutional challenge faced by Chinese entrepreneurs.
According to an estimate, only a small percentage of China's 40 million SMEs were able to
secure bank loans or other forms of formal funding, which has an impact on their ability to
succeed (Ji, 2009). This lack of formal funds has forced Chinese entrepreneurs to rely on their
own sources therefore, entrepreneurs typically borrow money from friends and family or spend
from their personal savings. However, various unofficial and grey market channels including
venture capitalists, private equity investors, and business angels are emerging and growing in
China (Newman et al., 2012).
Most of the small and medium-sized enterprises in China belong to resource-intensive
and labor-intensive industries. Due to this, the SMEs are weak in terms of the development of
core competencies and are small in size (Li et al., 2016). Historically, SMEs have relied on price
advantage to gain a competitive advantage and excel in the market. However, recently there has
been a continuous rise in the operational costs of SMEs. This increased cost contributes to
reduced profit margin which is reflected in the loss status of SMEs. While in 2011, 9.7% of
SMEs suffered a loss in China, this percentage increased to 18.8% in 2015. The rising cost can
be attributed to declining in the supply of labor, policies for improved employee wages,
investment in the provision of a better work environment, insurance, and increased employee
rights awareness. Energy shortage and internationally increasing energy prices also contribute to
increased costs and reduced profits (Cheng & Tang, 2016).
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Innovation is one of the essential elements that provide a competitive edge to
entrepreneurs. For higher productivity, there is a need to develop differentiated products and
continuously invest in research and development. While larger manufacturing companies have
access to state-of-the-art equipment and are able to innovate, small business owners are often
constrained by funds (Li et al., 2016; Murong et al., 2019).
There are many other barriers that offer a challenge to entrepreneurship growth in China.
Private entrepreneurs who lack government support may suffer as a result of the relatively high
levels of corruption in Chinese courts, which often results in small businesses losing legal battles
against powerful state corporations. Starting a business is also a very bureaucratic and time-
consuming process. Moreover, at a cultural level, the Chinese Confucian principles of respect
and submissiveness can clash with the values promoted by entrepreneurship (Javed, 2017).
Many foreign entrepreneurs have sought to enter the Chinese market to advance their
businesses in recent years, however, these individuals and enterprises have faced various
challenges. The foremost challenge is access to the local Chinese market. For a foreign
entrepreneur, the local market evaluation may be challenging. Moreover, it may be difficult to
ascertain the most suitable distribution channels and align practices with the relevant rules.
Another challenge faced by new market entrants is to get the correct items into the proper local
Chinese markets. Therefore, foreign entrepreneurs must conduct careful market research and
assess the best business channels prior to joining the Chinese markets (Donnelly, 2021). Another
challenge is related to foreign exchange control which is regulated by the State Administration of
Foreign Exchange. The organization has complex administrative procedures and strict policies
regarding foreign exchange which may lead to legal issues and operational difficulties for
foreign entrepreneurs. Another challenge faced by foreign entrepreneurs in China is related to the
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cultural and language barriers. A lack of formal education or work experience adds to the
challenge of conversing in Chinese. Since English is not an official language in China, the local
accents and language patterns often present difficulties for both Chinese and international
businesses (Dickson et al., 2020).
Pandemic Impacts on Entrepreneurs
The COVID-19 pandemic generated an increasingly negative impact on the economies of
countries around the world. Bringing the whole world to a halt, the pandemic impact all spheres
of life including health, social life, mental well-being, a normal life routine, and businesses.
Aspiring entrepreneurs and business owners are largely dependent upon macroeconomic factors
for the success of their endeavors. With the onset of COVID-19, lockdowns were imposed
leading to reduced revenues for existing businesses. According to the report of the China
Association of Small and Medium Enterprises, the business income of nearly 67.69% of SMEs
has reduced considerably whereas nearly 21.61% of SMEs face difficulty in the timely payment
of loans and other debts. This results in a greater strain on operating funds. The companies that
were unable to cut production costs, were faced with a negative cash flow. With constrained
access to revenue and capital, the pandemic posed increasing threats to innovation, leading to a
scarcity of business start-ups (Meunier et al., 2022).
According to Xu and Jia (2022), the pandemic has had a two-fold negative impact on
entrepreneurs. The pandemic directly impacts their health and when their start-ups fail and are
shut down, their income is diminished, leading to adverse effects on their well-being. The
Enterprise Survey for Innovation and Entrepreneurship in China found that during the epidemic,
entrepreneurs displayed a significant level of anxiety. For instance, Rong Chao, the founder of
Yihua Technology (a B2B platform company for fresh flowers), claimed that although festive
22
occasions such as Valentine’s Day were typically the highest selling times for the sector, the
pandemic led to lost revenue, which made him lose sleep and face increased stress (L. Peng,
2020). Moreover, the procurement of new resources has become increasingly difficult preventing
entrepreneurs from locating sufficient resources despite trying their best. Brown and Rocha
(2020) discovered that the pandemic drastically decreased the amount of capital in the Chinese
market, made resources more scarce, and made it more difficult for entrepreneurs to secure
investments despite increased efforts.
Another challenge of the pandemic is its impact on the value offered by human capital. A
decrease in this value has made it more challenging for businesses to react and adjust to
emergencies (Yarovaya et al., 2021). One of the most critical assets for startups is human
resources. It is also a significant source of knowledge (Halbesleben et al., 2014). The loss of
human resources directly impacts business operations, hindering startups in their ability to
discover and utilize fresh resources. The pandemic barred employees from physically reporting
for duty and also diminished employee performance in the remote set up which is characterized
by low efficiency. These elements further contributed to lowering the business profits. A series
of terminations as a result diminishing business revenue further depleted the human resources of
the company (Butterick & Charlwood, 2021).
The COVID-19 pandemic led to various preventive measures to limit the transmission of
the virus. This significantly disrupted the social and economic factors related to
entrepreneurship. While the adverse impacts of the pandemic were observed in businesses
around the world, small and medium-sized industries, and startups were among the most
vulnerable. These newly formed businesses were forced to lay off employees leading to
widespread unemployment, decreased productivity, and ultimately the downfall of economies.
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The global supply chain was also impacted by the pandemic. Due to a constraint on the supply of
goods and services, entrepreneurs faced a considerable reduction in revenue (Meahjohn &
Persad, 2020). According to Bodas and Peleg (2020), approximately 41% of startup businesses
fell in the red zone during the pandemic and faced a decline in monetary resources. Similarly,
nearly 74% of SMEs terminated the employment of their full-time worker. Moreover, 39% of
these SMEs reduced their employees by another 20% later. With a crash in the share value, many
entrepreneurs were forced to terminate all of their employees. In North America, employment
was reduced by 84%, in Europe by 67%, and in Asia, 59% of employees faced termination
(Bartik et al., 2020).
A study conducted by Schepers et al. (2021) explored the challenges faced by
entrepreneurs during the first wave of the pandemic. During this time the most adversely
impacted business functions were sales (60%) and operations (23%). During this time, the firms
endeavored to continue the sale of their inventory however, they observed an obvious decline in
the purchase. In this context, the attitude of growth-oriented entrepreneurs is further elaborated.
It was found that these entrepreneurs viewed this setback as an opportunity to develop their
entrepreneurial capabilities (Manfield & Newey, 2018). Two categories of capabilities were
identified. The operational capabilities included management of cash positions, frequent and
transparent communication, taking care of workforce. The dynamic capabilities included the
creation of new revenue models, build-measure-learn from the customer viewpoint, switching
roles of the growth-oriented entrepreneurs, build-measure-learn from viewpoint of peer-related
networks (Schepers et al., 2021). In regard to operational capabilities, entrepreneurs focused on
cash management and business innovation through customer feedback. This innovation included
a shift from the B2B model to the B2C model. Overall, the growth-oriented entrepreneurs
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highlighted the areas of learning such as new ways of working, integration of digital
technologies, and newly established sales approaches.
During the COVID-19 crisis, there were many opportunities for entrepreneurs to develop
new skills, including supply chain innovation, digitization, and crisis management. According to
Greiner's (1998) evolutionary theory of business growth, entrepreneurs should make the most of
the past to better understand the current crisis, plan for future crises, and transition successfully
from one growth stage to the next. While research indicates numerous pandemic-related
constraints, it is also important to understand that innovation is the most essential function of an
entrepreneur (Xu & Jia, 2022). Emergency situations such as the pandemic offer the perfect
opportunity to innovate and design personal and professional capabilities that would support the
survival of the business (Schepers et al., 2021).
Entrepreneurship
Historical Development of Entrepreneurial Theories
A review of the historical development of entrepreneurial theories is important to
understand as it would highlight the evolving attributes associated with entrepreneurs along with
the factors that contribute to their success. This historical overview is also important to establish
how entrepreneurs have learned to deal with failure over time. The meaning of entrepreneur and
entrepreneurship has evolved through centuries and until the middle ages, entrepreneurship was
associated with taking charge of large-scale projects (Hisrich et al., 2018). The definition of an
entrepreneur, as most people understand it, is someone who plans a business and takes on the
associated risk in exchange for a profit. This concept of risk was first introduced by Richard
Cantillon who coined the term entrepreneurship in 1755. Since then, theories on the phenomena
of entrepreneurship have been a source of debate among academics and theorists (Cherukara &
25
Manalel, 2011). Cantillon believed that all economic interaction and circulation could be
attributed to an entrepreneur who makes an uncertain profit thereby taking a risk, as contrasted to
wage workers and landowners, who both receive a set or predictable income (Hebert & Link,
1989). Cantillon, therefore, presents a definition of entrepreneur as a person who balances supply
and demand in the economy and takes on risk or uncertainty in this capacity (Bula, 2012). In
1771, Nicolas Baudeau was the first to introduce the idea that an entrepreneur might also be an
innovator, bringing invention and innovation into the conversation. Additionally, he highlighted
how processing information makes an entrepreneur a vibrant and effective economic agent
(Grebel et al., 2001).
A novel idea in the advancement of entrepreneurship theory emerged as a result of the
Industrial Revolution during the 18th century. By isolating them from finance suppliers,
academics around this time aimed to redefine entrepreneurs (Hisrich et al., 2018; J. Zimmerman,
2008). For the first time, academics understood that entrepreneurs are not always those who
invest in beginning a business. Venture capitalists, who typically have a lot of cash on hand, or
banks that lend money in exchange for interest are two possible sources of investors. However,
these entities cannot be termed as business owners who truly manage and run a firm. Therefore,
as a unanimous agreement, academics established that venture capitalists must not be included in
the definition of an entrepreneur (Hisrich et al., 2018).
In 1803, Jean Bapiste Say expanded on Turgot's concepts and redefined an entrepreneur
as a significant figure in modern economics. Say identified a three-part division: (1) the
philosopher who defines theory, (2) the entrepreneur who puts theory into practice by developing
beneficial products, and (3) the laborer who provides manual executes the labor. The role of the
entrepreneur is to coordinate and integrate the factors of production by successfully balancing
26
inputs and outputs, including the markets for raw materials, equipment, labor, and land. In return,
the person is compensated for this coordination. This compensation includes wages that, in
theory, is different from the capitalist’s interest payments (Kalantaridis, 2004). In this regard,
Say’s ideas were primary in establishing how the roles of entrepreneurs differed from capitalists.
He highlighted the importance of uncertainty as well. He realized that the uncertainty associated
with entrepreneurial ventures was one of the major factors due to which being an entrepreneur
was difficult. His ideas are regarded as a stepping stone for Schumpeter's entrepreneurship
theory (Cherukara & Manalel, 2011).
In 1921, Frank Knight differentiated between risk and unpredictability and connected
them to success of business and entrepreneurship. He asserted that since production takes time,
uncertainty is an enduring factor in business decisions. Making decisions on inputs today will
help produce output later on. This uncertainty prompts economic actors to take decisions based
on their knowledge and judgments, level of foresight, managerial skills, and confidence.
Entrepreneurs are able to predict the future, form sound hypotheses, and assume accountability
and control (Bula, 2012; Cherukara & Manalel, 2011).
In 1928, by proposing the advanced idea of Creative Destruction by Entrepreneurship,
Joseph Alois Schumpeter revolutionized the field of economics. For Schumpeter innovation is an
industrial mutation that incessantly revolutionizes the economic structure from within,
incessantly destroying the old one, incessantly creating a new one. This process of Creative
Destruction is the essential fact of capitalism (McCraw, 2010; Schumpeter, 2010, p. 83). This
attributes entrepreneurs as innovators who create novel patterns of production elements while
carrying out five important functions i.e., creation of new goods and commodities, devising
27
modern construction methods, development of new markets, procurement of supply sources, and
development of advanced industries (Crute, 2010).
In contrast to the views presented by Cantillon regarding the risk-taking nature of
entrepreneurs, Schumpeter posited that entrepreneurs are visionaries who possess the qualities of
being a leader and innovators (Minniti & Lévesque, 2008). Schumpeter further asserted that
capitalism not only never is but never can be stationary (2010, p. 83). The only constant in the
development of capitalist economies is change. The rate of change, however, is not constant.
According to Schumpeter, the development of capitalist economies is not continuous but rather
abrupt as the disruptions of entrepreneurial innovation happen at irregularly regular intervals
(Cherukara & Manalel, 2011).
In 1997, Israel Kirzner established his ideas and emphasized that entrepreneurial
discovery takes place in a state of disequilibrium. He argued that a continual state of
disequilibrium exists in the economy as a result of shocks that frequently affect it. Additionally,
economic agents are completely ignorant as they simply are not aware that there is additional
accessible knowledge to be used (Grebel et al., 2001). Therefore, being entrepreneurially aware
means having an open mind to opportunities that have been previously overlooked. With each
innovation, the entrepreneur learns something new that they had previously missed (Kalantaridis,
2004). Therefore, a market imbalance is regarded as an opportunity by entrepreneurs.
Entrepreneurs that notice a market imbalance can satisfy consumer requirements by developing
unique commodities and services (Spencer et al., 2008).
Throughout history, the perception of failure in the business world has undergone a
significant transformation. Once viewed as a grave defect to be harshly penalized, failure has
gradually become recognized as a natural occurrence inherent to the functioning of the economic
28
system. This paradigm shift has had far-reaching implications, not only influencing the evolution
of bankruptcy laws but also shaping the policies aimed at fostering entrepreneurship in modern
markets (Eklund et al., 2020). Bankruptcy law, from a technical standpoint, serves as an
institutional framework for addressing market failures. The transformation of bankruptcy law has
been instrumental in creating a more conducive environment for entrepreneurial activities. By
providing a legal framework that addresses the consequences of business failure, it allows
entrepreneurs to take risks without fear of catastrophic personal consequences. This, in turn,
encourages innovation, investment, and economic growth.
In the context of China, the economic growth of the country can be attributed
significantly to small and medium-sized businesses. With promising prospects of market
development, numerous new entrepreneurs used diverse and rich channels to conduct various
entrepreneurial activities leading to a year-by-year increase in the number of start-ups. However,
is important to note that starting a new business is a complex process, therefore, it was observed
that almost half of these startups remained operational for less than 10 years. This means that
while new business owners appeared every year, many existing entrepreneurs left their
businesses due to failure (M. W. Peng et al., 2010). Research regarding entrepreneurship and
failure indicates that most small and medium-sized businesses are able to promptly respond to
changing customer needs due to a high level of flexibility and a small number of employees,
however, their failure has been associated with a lack of sufficient funds and their inability to
invest in human capital. Moreover, these enterprises are not equipped to take on the challenges
of the changes in the external environment, leading to a failure (Pan et al., 2022).
With the advent of the 21st century, the research pertaining to entrepreneurship gradually
moved away from an economic perspective and toward a behavioral approach. Over the past 20
29
years, modern economic theories of entrepreneurship have evolved continuously. These theories
are influenced by a variety of academic fields, including sociology, psychology, and history
(Franek et al., 2019). As a result, the field's recent methodology has shifted toward a more
multidisciplinary focus. Modern studies in the field of entrepreneurship should look beyond
economic considerations to understand all entrepreneurial behaviors as both environmental and
human elements are crucial for understanding how entrepreneurs behave (Murphy et al., 2005).
The Entrepreneurial Process
It is important to understand the entrepreneurial process as it highlights the various
factors that contribute to each step of the entrepreneurial activity. By outlining the various steps
of this process, a systematic determination of factors contributing to failure can be possible.
Moreover, it can also help in establishing the psychological, social, emotional, and financial
demands associated with this process and an entrepreneur’s response to these factors. The
process of entrepreneurship is not based on a singular perspective, rather it is an integration of
personal, environmental, social, and organizational perspectives. According to Bygrave and
Zacharakis (2004), the entrepreneurial process is based on a set of steps that follow each other. It
begins with the conception or idea of a business venture and is followed by the events that
prompt operations. Recognizing opportunities is the first stage in the entrepreneurial process that
enables entrepreneurs to look for untapped opportunities in the market. Opportunities may arise
from a complex interplay of shifting external factors including economic upheaval, social
conditions, and political situations. Being perceptive to changes in those circumstances,
entrepreneurs are able to spot possible business opportunities (J. Zimmerman, 2008). The events
that prompt action are largely based on decision-making, more importantly, the decision to be an
entrepreneur (Zou, 2015). Therefore, after an opportunity has been realized, individuals make
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decisions about being entrepreneurs. The decision to pursue an entrepreneurial career is
influenced by two major motivators (Ronen, 1983). First is the individual's interest in starting a
business in second is the predicted outcome or probable fortune yielded by the identified
opportunity. The second motivator plays a greater part in influencing and entrepreneurial activity
rather than a mere desire to be an entrepreneur. The entrepreneurial process is associated with
many other benefits which may influence an individual's decision such as peer recognition,
respected social status, and financial freedom.
Next, the implementation of ideas takes place followed by continuous growth (Bygrave
& Zacharakis, 2004). This process of entrepreneurship outlined by Bygrave and Zacharakis does
not take place in a vacuum, rather at each stage, critical factors impact business development
which may be personal attributes or environmental characteristics (2004). Through a
combination of actions such as quitting a job, purchasing resources, hiring employees, setting up
a workspace, etc. the entrepreneurial process proceeds. The entrepreneurial process is not always
followed in a definite order as oftentimes it can exhibit a chaotic pattern where some activities
predominate for a while over others (Gatewood et al., 1995; Nassif et al., 2010).
Bygrave and Hofer (1992) defined the entrepreneurial process as a personal pursuit of
opportunities aimed at creating and innovative organization. The authors also highlighted nine
essential characteristics of this process. In this regard, an entrepreneurial process is characterized
by free will or self-determination. This process occurs within an entrepreneur’s firm and contains
change as well as discontinuity. The entrepreneurial process is dynamic by nature with unique
experiences for each entrepreneur. This holistic process involves various precedent variables
such as customer needs, business strategy, and competitor positioning. Lastly, these precedent
variables strongly influence the outcomes of any entrepreneurial venture.
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Guerrero et al. (2021) aimed to establish the various factors that influence the
entrepreneurship process. In this context, heterogeneous environmental conditions such as
policies and procedures, culture, funding, labor market, research and development, market
dynamics, and professional infrastructure were recognized across countries. The study asserted
that for a successful entrepreneurial process, the context of the activity and diversity played a
significant part. Among the favorable conditions, investment in research and development,
professional support, and networking with multiple agents were highlighted. On the other hand,
lack of funding, social norms, and labor market conditions contributed to less favorable
environmental conditions.
Research on the process and traits of entrepreneurship in relation to failure provides
valuable insights into the dynamics and factors that contribute to success or failure in
entrepreneurial endeavors. In this context, research suggests that failure can be a powerful
teacher for entrepreneurs. Experiencing failure and reflecting upon it can lead to valuable
learning outcomes, such as increased knowledge, enhanced problem-solving skills, and improved
decision-making abilities Politis (2008) explored the significance of previous start-up experience
as a means of learning in the entrepreneurial journey. The study focused on three specific
learning outcomes and compares habitual entrepreneurs, who have prior start-up experience,
with novice entrepreneurs who are new to the entrepreneurial process. The three outcomes under
examination were: 1) skills for dealing with the challenges faced by new ventures, 2) the
preference for a reasoning approach known as effectual reasoning, and 3) mindsets towards
failure. The results of the study indicated that there are notable differences between habitual and
novice entrepreneurs in relation to these dimensions. The findings suggest that habitual
entrepreneurs possess distinct skills and capabilities that help them cope with the obstacles
32
commonly encountered by new ventures. They are better equipped to handle the liabilities
associated with starting a new business.
Resilience and perseverance are important skills associated with the entrepreneurial
process. Resilience, characterized by the ability to bounce back from failure and persist in the
face of adversity, is an important trait among successful entrepreneurs. Resilient individuals are
more likely to view failure as a temporary setback and continue pursuing their goals (Cardon et
al., 2005). Moreover, the way entrepreneurs perceive and manage risks can influence their
likelihood of encountering failure. Research suggests that successful entrepreneurs tend to have a
realistic understanding of risks, carefully assess them, and implement effective risk management
strategies (Al-Mamary & Alshallaqi, 2022). Effective risk management includes aspects such as
diversification, contingency planning, and seeking expert advice to mitigate potential failures.
Characteristic Traits of Entrepreneurs
Numerous academics have investigated the contributions of entrepreneurial traits that
enable individuals to succeed in their entrepreneurial careers. The research in the area of
entrepreneurship demonstrates that entrepreneurs possess certain common traits. Although
defining an entrepreneur precisely is difficult, the traits demonstrate a constancy in nature that
can contribute to outlining the important characteristic features. Entrepreneurial research can be
categorized into two main categories i.e., research regarding the contextual factors (social,
economic, and political) and research regarding the personality traits of entrepreneurs
(Salamzadeh et al., 2014).
Various attributes have been associated with entrepreneurs. Rauch and Frese (2000)
highlighted autonomy and independence as essential traits whereas Gibcus and Ivanova (2003)
identified an entrepreneur as an optimist with a desire for achievement and a need to be
33
autonomous. Similarly, Stroe et al. (2018) highlighted risk perception and self-efficacy as
important entrepreneurial attributes. Some of these psychological traits increase the likelihood
that an entrepreneur will launch their business. It is widely acknowledged that entrepreneurs are
people who act and put out strong, consistent efforts to turn their concepts and ideals into
successful, operational businesses (Gieure et al., 2020). This propensity for action is essential to
the entrepreneurial process (Baum et al., 2007). As a behavioral trait, entrepreneurship is termed
to be genetically determined. This inherent trait prompts entrepreneurs to react differently to
external stimuli, particularly those involving danger, risk, excitement, and change (Fisher &
Koch, 2008).
Despite the various entrepreneurial traits identified in the literature, four personality traits
have been discussed most frequently. These include personal values, locus of control, need for
achievement, and risk-taking (Gibcus & Ivanova, 2003; McClelland, 1987; Salamzadeh et al.,
2014). Personal values are of great significance in successful entrepreneurial outcomes. Personal
values of autonomy, achievement, and leadership are found to be higher in entrepreneurs as
compared to others (Hornaday & Aboud, 1971). Moreover, the personal values of being
fortitudinous, visionary, honest, trustworthy, and brave are also associated with entrepreneurs
(Smilor, 2004).
Rotter presented the Theory of Social Learning in 1966 and introduced the concept of
locus of control. Since then, many theorists have considered the locus of control as a trait. The
basic tenet of Rotter’s theory is that how individuals interact with their environment determines
their personality. This theory emphasizes the impact of beliefs and reward values on behavior
while focusing on a particular context. Locus of control, in general, is the extent to which
individuals believe they can influence the consequences that impact them (Rotter, 1966). Locus
34
of control may be internal or external. External locus of control is characterized by an occurrence
that is interpreted by outside forces such as destiny or luck, or by those in charge of other people.
These factors are not only outside one’s influence but also complex and unpredictable. In
contrast, an internal locus of control is established when a person's own actions or personality
traits have the power to affect an event. Research implies that entrepreneurs have a better
inclination toward internal control than the general population (Salamzadeh et al., 2014).
According to McClelland, a need for achievement is the driving force behind a specific
set of entrepreneurial behaviors. According to his definition, it is a desire to do well for the sake
of an inner feeling of personal accomplishment and he believes it to be the primary motivation
behind achieving a goal tied to a set of criteria (McClelland, 1965).
Another aspect of the entrepreneurial process that is commonly discussed is risk-taking
which may be financial, social, or psychological (Hisrich et al., 2018). Entrepreneurs can be set
apart from managers in the sense that they not only take risks but also create new ones (Atherton,
2004). They not only assume financial risks, such as those associated with starting a new
company, but also social and personal consequences related to their careers, families, and well-
being. However, entrepreneurs steer clear of risks that they cannot adequately assess and have
only moderate control over. This distinguishes them from the risk-taking behavior of gamblers
(Liles, 1974).
Leadership
The concepts of leadership and entrepreneurship are essential to the theoretical
foundation of this study. By exploring the key theories of leadership, this section aims to form a
basis for leadership lessons learned through the process of entrepreneurship and the probable
failure associated with it. Leadership, as a concept, is most intricate and multifaceted. According
35
to Warren Bennis (2009), leadership remains one of the least understood concepts despite being
one of the most researched ones.
Numerous definitions and theories of leadership have been put forth by researchers over
the years. Stogdill describes leadership as “the process (act) of influencing the activities of an
organized group in its efforts toward goal setting and goal achievement” (1950, p. 4). According
to Northouse (2022), leadership is not a single isolated action, rather it encompasses a process.
This process is carried out by the leader to persuade the followers to work toward a common
objective. Similarly, Kouzes and Posner (1995) regard leadership as the art of mobilizing
individuals for the achievement of common aspirations whereas Maxwell (2005) states that
leadership is influence. Any organization's success is believed to be dependent upon effective
leadership. Leadership goes beyond setting up expectations and aims toward progress (Williams,
2005).
Leadership theories such as authentic leadership and ethical leadership also provide
important insights regarding failure. Authentic leadership theory suggests that leaders who
display authenticity and transparency are better equipped to handle failures. Research indicates
that authentic leaders build trust, maintain open communication, and foster psychological safety,
allowing their teams to learn from failures without fear of punishment or retribution (Walumbwa
et al., 2008). Authentic leaders acknowledge their own failures, take responsibility, and use them
as teachable moments to enhance team performance. Similarly, ethical leadership research
highlights the importance of ethical decision-making and accountability in the face of failure.
Ethical leaders prioritize the greater good, act with integrity, and take responsibility for failures,
even if they are not directly responsible (M. Brown et al., 2005). They promote a culture of
transparency, learning, and ethical behavior, mitigating the likelihood of failures caused by
36
unethical practices. Adaptive leaders also embrace failure as a natural part of the change process
and promote a culture that encourages experimentation and learning from failures (Heifetz et al.,
2009). They create an environment where failure is viewed as an opportunity for innovation and
growth rather than a sign of incompetence.
The history of leadership and failure is intertwined, as leaders throughout time have faced
various challenges and encountered failures in their endeavors. Research suggests that effective
leaders learn from failure and use it as a platform for growth and improvement. They engage in
reflective practices, analyze failures, and extract valuable lessons that inform their future
decision-making and leadership approaches (Day et al., 2014). Learning from failure can
enhance leaders’ knowledge, skills, and resilience, ultimately improving their ability to lead and
navigate complex challenges.
Traits Theory
The traits approach of leadership emerged as one of the earliest methods which establish
the traits of both successful and unsuccessful leaders. This approach focuses on the personalities
and traits of leaders. In other words, early academics thought that it was possible to tell leaders
from non-leaders by their innate characteristics. As a result, scholars throughout this time period
concentrated more on analyzing the exact characteristics that were common among great leaders
(Robbins & Judge, 2013).
The trait approach contends that leaders possess specific physical and psychological
features that distinguish them from non-leaders. Jenkins (1947) identified two traits i.e. emergent
traits and effectiveness traits. The emergent traits are genetically influenced and include height,
attractiveness, intelligence, and self-assurance whereas effectiveness traits are acquired and
based on learning and experience (Jenkins, 1947). Similarly, the Big Five personality factors
37
theory outlines five factors and their association with leadership. These include neuroticism,
extraversion, openness, agreeableness, and conscientiousness with extraversion and
conscientiousness most closely linked to effective leadership (Northouse, 2022). While certain
traits are associated with effective leadership, the absence or extreme presence of these traits can
contribute to leadership failure (Ozbag, 2016). For instance, leaders who exhibit high levels of
neuroticism may struggle to remain composed under pressure, making irrational decisions.
Similarly, individuals lacking in extraversion may struggle to communicate and connect with
others, hindering their capacity to inspire and influence their subordinates.
Style/ Behavioral Theories
The behavioral or style approach emphasizes leaders' behaviors as opposed to the traits
approach, which concentrates on leaders' traits and personalities. This approach aims to
categorize leaders' actions and the impact of these actions in affecting followers' ability to
accomplish a task. Much like one size does not fit all people, one leadership style cannot work in
all circumstances. In 1989, GaryYukl presented three distinct leadership styles i.e., democratic,
autocratic, and laissez-faire. In addition to performing with high levels of energy and excitement,
those who worked under the leadership of democratic leaders reported high levels of satisfaction,
creativity, and drive. They also maintained stronger relationships with the leader. However, even
democratic leaders can experience failure if they fail to effectively communicate or involve their
followers in decision-making processes.
On the other hand, workers under autocratic leaders were primarily concerned with
producing greater output. This style of leadership may lead to high productivity in certain
situations but can also result in reduced morale and resistance from followers. Leadership failure
38
can manifest when autocratic leaders disregard the opinions and needs of their subordinates,
leading to a lack of engagement and collaboration (Van Vugt et al., 2004).
Laissez-faire leadership has been considered to be most suitable when leading a group of
greatly driven, trained, and knowledgeable individuals (Ahmed Khan et al., 2016; Yukl, 2013).
However, leadership failure can occur if the laissez-faire leader neglects their responsibilities,
fails to provide guidance or support, and allows the team to lack direction or coordination.
Contingency/ Situational Theories
According to the contingency or situational theory, There is no single right way to lead
because the internal and external dimensions of the environment require the leader to adapt to
that particular situation (Greenleaf, 2002). The theory of contingency posits that a single
leadership style is not all-encompassing because leadership is influenced by many different
factors, such as followers, quality, situations, and other factors. Most of the time, leaders
influence people within the organization along with the dynamics and atmosphere. The theories
of contingency are a subset of behavioral theory that, in a straightforward sense, contests the idea
that there is a single best method of organizing and leading and that some situations call for a
particular leadership approach while others do not (Northouse, 2022). According to the
contingency or situational theory, leadership failure can be attributed to the mismatch between
the leader's approach and the demands of the particular situation. When leaders fail to adapt their
leadership style to the specific circumstances they are facing, it can lead to ineffective leadership
and negative outcomes (Johansen, 1990; Mircetic & Vukotic, 2020).
Transformational Leadership
Transformational leadership is based on the premise that leaders should inspire, motivate,
and encourage their followers (Aarons, 2006). Today, the world has become increasingly
39
challenging and complex. In the current era, leadership theories are required to address the
massive globalization, technological inventions, and continuous change, prompting a shift from
the old-style theories of leadership that define leadership as a unidirectional, top-down
influencing process, drawing a distinct line between leaders and followers (Benmira & Agboola,
2021). This new leadership era focuses on the complexities of interaction between the leader,
followers, situation, and the overall system. The leadership focus has shifted considerably to the
dormant leadership capacities of followers with an aim to activate them successfully. This theory
is most helpful when an organization is going through a significant change or needs a new
direction. According to Bass and Avolio (1994), a transformational leader attempts to induce
followers to reorder their needs by transcending self-interests and strive for higher order needs.
Such a leader goes beyond mere agreements and exchanges when interacting with followers and
colleagues. Despite its potential benefits, transformational leadership can also be associated with
leadership failure if not implemented effectively. Transformational leaders are expected to adapt
to changing environments and guide their followers through uncertainty. However, if a leader
fails to adapt to new circumstances or lacks the necessary skills to navigate complexity, their
leadership may falter (Chen et al., 2018).
Entrepreneurial Leadership
Within the fields of leadership and entrepreneurship, entrepreneurial leadership is a
relatively new paradigm with its theoretical foundations still under development (Bagheri &
Pihie, 2011). Historically, entrepreneurs have been viewed as visionary leaders who depended on
others to carry out their plans. Entrepreneurs ultimately develop and lead a team devoted to
achieving their vision by being adept at persuading and inspiring individuals to join and work for
them. As a result, it is asserted that entrepreneurial leadership entails leadership tasks such as
40
creating clear objectives and vision, promoting opportunities, and managing a group of people
(Cunningham & Lischeron, 1991). At the individual level, entrepreneurs and leaders share a
number of traits, such as creativity, a willingness to take calculated risks, and the capacity to see
the future of their companies and organizations (Fernald Jr et al., 2005). While considering the
similarities in the two fields, some academics characterized entrepreneurship as a sort of
leadership and identified most of the entrepreneurial behaviors as leadership behaviors, though in
a specific setting (Cogliser & Brigham, 2004; Fernald Jr et al., 2005).
Bagheri and Pihie (2011) outlined proactiveness, innovativeness, and risk-taking as the
personal capabilities of business leaders. Similarly, Swiercz and Lydon (2002) identified
intellectual integrity, promoting the company rather than the individual leader, utilizing external
advisors, and creating a sustainable organization as self-competencies of entrepreneurial leaders
(Bagheri & Pihie, 2011). Moreover, finance, marketing, and human resources were identified as
the most essential functional capabilities of business leaders (Swiercz & Lydon, 2002). The three
potentially harmful behaviors of entrepreneurial leaders are risk confrontation, stress, and ego.
For instance, business owners may become physically ill as a result of severe stress brought on
by high risk. Additionally, an overbearing need for control, a sense of distrust, an overriding
desire for success, or unrealistic optimism resulting from an entrepreneur's ego may either help
them succeed or impair their judgement while making business decisions (Kuratko, 2007).
Research indicates six distinguishing characteristics of entrepreneurial leaders. First,
entrepreneurial leaders constantly strive for the development of entrepreneurial capabilities
related to innovation and strategic resource management. Second, these leaders promote
innovative thinking by openly discussing the advantages of inventiveness. Third, entrepreneurial
leaders are able to actively identify opportunities and clearly translate them into achievable
41
outcomes. Fourth, these leaders effectively assess and evaluate market assumptions and aim to
achieve the most conducive option for the company to achieve the identified opportunity. Fifth,
these leaders maintain the company’s focus by continuously reflecting on and evaluating the
company’s processes. Lastly, entrepreneurial leaders retain their resource advantage while
striving to generate outcomes of greater value (J. Covin & Slevin, 2017). In light of these
distinguishing characteristics, entrepreneurial leadership can be defined as the ability to influence
others to manage resources strategically in order to emphasize both opportunity-seeking and
advantage-seeking behaviors (Ireland et al., 2003b).
Entrepreneurial leadership is crucial in the setting of small businesses since an
entrepreneur's capacity for leadership can decide the course of a small company. In this regard,
entrepreneurial leadership aims to create a vision and develops a team to support it (Gupta et al.,
2004). Developing the theoretical foundation of entrepreneurial leadership, Gupta et al. (2004)
highlight that during organizational development, entrepreneurial leaders face two interrelated
problems. The first challenge referred to as scenario enactment, entails imagining the future and
constructing a scenario of creative possibilities. This failure may occur when entrepreneurial
leaders struggle to effectively imagine and articulate a compelling vision resulting in the
organization struggling to survive in the complex business landscape and adjust their practices to
the evolving market conditions.
The second issue is cast enactment, which is described as persuading and motivating a
group of capable and dedicated supporters who are capable of achieving the scenario's goals.
Entrepreneurial leaders must be proactive, imaginative, and willing to take risks in order to meet
these problems and also strive to build commitment among their followers (Gupta et al., 2004).
This can be attributed to the leader’s inability to effectively communicate and rally their team
42
members around the envisioned future. When the cast enactment fails, team members may
become disengaged, demotivated, and less committed to achieving the organization's objectives,
leading to a breakdown in collaboration and reduced overall performance.
Leadership failure in the context of entrepreneurial leadership can have significant
implications. Without a clear vision of the future and the ability to inspire and mobilize a capable
team, the organization may struggle to adapt to changing circumstances and capitalize on
opportunities. This failure in leadership can lead to stagnation, missed opportunities, and
ultimately, the decline of the organization's competitive position. Additionally, it can impact
employee morale, trust, and engagement, undermining the overall productivity and effectiveness
of the workforce (Yang et al., 2019). Therefore, leadership failure in entrepreneurial settings has
far-reaching implications for both the organization and its stakeholders.
Psychological and Emotional Impacts of Entrepreneurial Failure
Entrepreneurial Failure (EF)
Despite advanced planning and calculations, entrepreneurial failure is quite likely to
occur due to reasons outside the control of an entrepreneur. EF is regarded as an important part
of the entrepreneurship process (McGrath, 1999; S. Zahra & Dess, 2001). A broader definition of
EF can be regarded as a deviation of outcomes from the expected goals of the entrepreneur
(McKenzie & Sud, 2008). Cannon and Edmondson (2001) also define failure as a:
deviation from expected and desired results. This includes both avoidable errors and
unavoidable negative outcomes of experiments and risk-taking. It also includes
interpersonal failures such as misunderstanding and conflict. Our conceptualization is
deliberately broad, encompassing failures of diverse types and magnitude, because we
43
propose that opportunities for learning exist in both minor misunderstandings and major
mishaps. (p. 162)
EF can be defined as the cessation of involvement in a venture because it has not met a
minimum threshold for economic viability as stipulated by the (founding) entrepreneur
(Ucbasaran et al., 2011). In the context of entrepreneurial activity, failure results in insolvency or
bankruptcy (Cotterill, 2012). Entrepreneurial failure may be defined as a psycho-economic
phenomenon that occurs when an organization undergoes a series of underperformances and
leads to the entrepreneur’s psychological state of hopelessness and disappointment. This failure
may be caused by the lack of achievement of set expectations such as poor efficiency, delayed
innovation, insufficient return, etc. (Khelil, 2016; Klimas et al., 2021).
Failure is defined as involuntary change in both the ownership and management of the
business owing to poor performance (Shepherd, 2003b). It can be synonymous with a distinct exit
from the entrepreneurial activity or the business venture (Wennberg et al., 2010). Failure may
occur at the individual or firm level. At individual levels, an exit from the firm may not necessarily
entail failure as entrepreneurs often exit the firm to collect their investment or may retire to follow
an alternative employment path (Detienne et al., 2014; Wennberg et al., 2010). Whereas firms are
forced to exit when they become financially unviable for business i.e., insolvency, or they might
be closed down by the entrepreneur’s choice due to insufficient return on investment. Firms may
also be shut down if the assets are no longer worth any benefits (Coad, 2014). Firm exit, therefore,
captures failure in a broader sense with some variance in the extent to which the business is
economically unviable at the time of its closure. Moreover, EF may be a result of legal issues,
personal problems, or the dissolution of a business partnership (Singh et al., 2007a).
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There are various causes of failure among which economic recession is an important factor.
In situations where the economy is compromised such as during a natural disaster or other
emergencies such as the pandemic, small and medium-sized enterprises are greatly impacted (Jin
et al., 2017). These smaller businesses find it increasingly challenging to enhance their sales due
to changing customer behavior who are more eager to save money rather than spend it.
Entrepreneurial activity can also be explained in terms of social capital which plays an
essential role in determining the success or failure of a new venture (Bamford et al., 2006). As
entrepreneurs, social capital which includes business connections, networks, and personal
relationships, provides a competitive advantage to the individual. During the pandemic or other
disastrous situations, the social network may become compromised, leading to the eventual failure
of enterprises.
Several types of reasons can be identified as the major causes behind entrepreneurial
failures. In most cases, entrepreneurial failures are caused because of various types of
entrepreneurial traits and processes. These issues are often seen in the failure histories of
entrepreneurs all over the globe.
Initially, the entrepreneurial process is an integrated one that needs to be properly
performed by any entrepreneur for performing the duties successfully. An entrepreneurial process
can be divided into some major steps including idea generation, opportunity evaluation, planning,
business formation, launch, and growth (McCann & Vroom, 2015). Each of these steps is needed
to be completed using appropriate tactics and resources. The inability of completing even a single
one among them can cause huge suffering for the entrepreneur. Firstly, a suitable idea needs to be
generated which should possess the capability of meeting market needs and filling market gaps. In
the next phase, this idea needs to be evaluated based on the particular market where the
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entrepreneur is intending to launch the business. Inaccurate market evaluation can provide wrong
ideas about the market which will lead to making inappropriate decisions. The next step is about
making suitable planning for the business that should possess enough level of flexibility. Many
entrepreneurs make unrealistic planning without following any particular theory like SMART
objectives which causes them failure on implementing the ideas and adapting to any type of change
(Leschke, 2013). Aside from these, business formation and launch also need to be done in the right
way by recruiting quality employees, using adequate resources, building proper infrastructure, and
implementing the planning accurately. From the inability of performing any of these steps, an
entrepreneur fails in ensuring the maximum utilization of any entrepreneurial opportunity.
Apart from the entrepreneurial processes, a lack of entrepreneurial traits also often causes
entrepreneurial failures. An entrepreneur should possess some distinct traits or skills which would
help him/ her in becoming successful in the entrepreneurial initiative. These include
communication, innovation, vision, flexibility, leadership, knowledge and information, confidence,
and so on (Lombardi et al., 2021). All these traits are quite significant for any entrepreneur to
master of. Lack of these traits inside an entrepreneur can cause several issues in the business
initiative which might be quite tough to overcome. Communication is one of the most important
ones among these that indicate the ability to communicate with anyone, anytime easily. An
entrepreneur needs to keep a connection with several types of stakeholders of the business to
perform all the activities of the organization smoothly. Without decent communication skills, this
cannot be done by an entrepreneur. On another hand, innovation is a primary need that makes an
entrepreneur generate noteworthy ideas and tactics for the business which can reshape business
processes, products, and services positively (Feldman, 2014). Aside from these, a visionary mind
and a higher level of confidence are also compulsory for entrepreneurs to possess. Many
46
entrepreneurs also fail because of not being able to lead the organization or the team in the proper
manner. Flexibility is also substantial for leadership that makes a leader adaptive to any type of
condition. Confidence also needs to be integrated with the leadership for getting the maximum
output. This trait is quite momentous for an entrepreneur in several aspects. Finally, adequate
knowledge and information also need to be possessed by an entrepreneur which will assist in
making the right decisions. Entrepreneurs without enough level of information about the product
or the market often fail to make appropriate moves in the market causing huge failure.
In this highly competitive business world, an entrepreneur should possess the maximum
potential for being a successful entrepreneur based on entrepreneurial traits and entrepreneurial
processes. Otherwise making the right decisions cannot be possible which can lead any business
toward failure within no time.
The Impact of Entrepreneurial Failure
Entrepreneurs may incur a range of monetary, psychological, and social consequences in
the event of failure. A loss or decrease in personal income may be linked to financial
consequences. The social costs of failure include events such as divorce or the loss of a
significant social network, as well as the effects of failure on interpersonal and professional
relationships (Cope, 2011b; Harris & Sutton, 1986).
In terms of financial impacts, entrepreneurs who seek immediate success often make
aggressive investments which may either result in huge financial losses or major success.
According to a study conducted by Cope (2011), a majority of participants reported experiencing
a certain degree of financial loss as a result of entrepreneurial failure. In minor cases, participants
reported a financial loss in terms of loss of income due to the closure of business. In more severe
cases, financial damage in the form of loss of personal assets, such as property, retirement funds,
47
and pension was reported. Long-term financial losses result in the entrepreneurs’ incurring debts
but extensive greater damage. In some cases, the loss can be recovered by finding alternative
employment or starting a new venture (Singh et al., 2007a).
Entrepreneurial failure may also impact the individual's social relationships. The concept
of failure has a certain stigma attached to it which leads to some individuals engaging in “self-
imposed social distancing and withdrawal” (Cardon et al., 2011; Ucbasaran et al., 2013a, p. 177).
The social impact of a failure at a personal level is characterized by an increased sense of
loneliness stemming from the embarrassment to face family or peers after suffering a loss. Singh
et al. (2007) regarded this feeling of loneliness as a starting point of social cost which in extreme
cases may even lead to a breakdown of relationships such as divorce. In contrast, at a
professional level, these individuals must mend their relationships with their employees,
customers, partners, and investors, developing a relationship based on regained trust. In case of
severely damaged business relationships, legal actions such as lawsuits may be enacted.
The humiliation associated with failure often leads to a social devaluation of the person
who is no longer able to conform to social norms (Sutton & Callahan, 1987). The psychological
consequence of entrepreneurial failure is either emotional or related to motivation. Emotional
consequences may manifest through the negative of, regret, anguish, embarrassment, shame,
rage, guilt, and fear of the future (Cope, 2011b; Shepherd, 2003b). Regarding the motivational
elements of psychological costs, several authors pointed out that entrepreneurs who fail
experience a sense of helplessness that lowers their beliefs in their capacity to lead tasks
successfully in the future (Bandura, 2001; Shepherd, 2003b). Various studies have indicated that
grief is a common psychological outcome of failure. Moreover, feelings of panic, helplessness,
loss of control over a situation, and experiencing varying degrees of anxiety, fear, and depression
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are also highlighted. Self-denial and anger are also psychological impacts of entrepreneurial
failure (Cope, 2011; Singh et al., 2007).
Additionally, the entrepreneur's response as well as the environment in which he or she is
operating might have an impact on how severe these adverse effects are. The process of learning
from failure may be impacted by the consequences and scope of these interrelated costs (De Hoe
& Janssen, 2022; Ucbasaran et al., 2013a).
Failure is a common word for any entrepreneur. The path toward achieving success is not
smooth for any entrepreneur. Each one has to cross a road that is quite tough and full of failures.
These failures are needed to be taken normally by any person which is confident to the maximum
extent and have the potential of becoming successful one day. However, not everyone can take
these failures positively. The tremendous impact of entrepreneurial failures is seen among
entrepreneurs all over the globe. These failures can be assessed from two significant viewpoints-
social and psychological.
The psychological one is closely related to individuals who fail in implementing the idea
properly and achieving success. This refers to the impact of any failure of the entrepreneurs on
their mental conditions. Mental condition is the primary and most notable one which faces the
negative impact of experiencing an entrepreneurial failure. In most cases, it deteriorates the
confidence level of an entrepreneur to the maximum extent (Liu et al., 2019). After facing
failures, entrepreneurs become reluctant to take another entrepreneurial step. Psychologically an
entrepreneur becomes so much reluctant that he/ she does not get engaged in any type of
entrepreneurial activities in the future. Because of this reluctance, even notable and strong ideas
remain unimplemented. On another hand, entrepreneurial failures create fear among the
entrepreneurs that resists them from gathering more courage and initiating the business again
49
(Cacciotti et al., 2016). Financial loss is a major impact of entrepreneurial failure which also
causes psychological deterioration of confidence. Another impact is seen in the passionate
mentality of the entrepreneur which becomes eradicated because of entrepreneurial failures.
These psychological impacts are often connected with other types of outcomes of entrepreneurial
failures. For example, social issues also make entrepreneurs less confident about themselves.
Social issues are most acute for which not only an entrepreneur but also his/ her friends
and relatives become affected. The failure of a courageous entrepreneurial step creates
misconceptions in society and members of the society start possessing negative ideas about the
entrepreneur. It sometimes creates deterioration in the social status of the entrepreneurs. This
social outcome often impacts the psychological condition of the entrepreneurs negatively to the
maximum extent. The most important aspect of entrepreneurial failure is seen in the mocking of
friends and relatives of the entrepreneur in society. An entrepreneur has to tackle these issues and
energize him/ herself again for new ideas which becomes much tougher for lots of entrepreneurs.
This is why they don’t think again about entrepreneurship after one or two failures. The negative
social impacts become most acute in societies where people do not possess an adequate level of
knowledge about entrepreneurship and several of its aspects. In these societies becoming a
successful entrepreneur and taking the burden of previous failures on the shoulder is quite tough.
Besides, other people with innovative ideas also become demotivated by seeing the failure of one
entrepreneur.
The social impact of entrepreneurial failure is quite acute and needs to be eradicated for
mitigating its psychological impact (Ucbasaran, et. al., 2013). Psychological pressure is created by
social impacts in most cases as these are connected. This is why to create an entrepreneurship-
friendly environment, social negative outcomes of entrepreneurial failures need to be eradicated.
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Thus a society can be built where entrepreneurs will not face any type of psychological pressure
or burden to continue their activities being confident and fearless.
Failure and Entrepreneurial Learning
Learning is a multifaceted phenomenon that affects practically every aspect of human
endeavor. For instance, cognitive, behavioral, emotional, and social components – all have a role
in learning (Cope, 2011). Furthermore, learning is a situated and (re)generative activity that, both
instinctively and with the consent of the learner, builds upon and adds to one's direct and indirect
experiences (Nogueira, 2019). Additionally, learning is a phenomenon that affects teams,
companies, and individuals as well. While exploring the nature of entrepreneurial learning,
Wang and Chugh (2014) summarized three important points. First, entrepreneurial learning
applies to individuals as well as organizations (individual and collective). Second, it is the
practice of learning behavior (exploratory and exploitative) by firms and individuals. Third, it is
based on the individual's learning style (intuitive and sensing).
In the current economic scenario, engagement in learning is central to the progress of
entrepreneurs as this learning enables the development of competencies required to create a
thriving business. These competencies pertain to forecasting the market potential for new
technologies, generating revenue to create new startups, and managing enterprises to develop and
advance a business from the initial stages to the stage of maturation (Harrison & Leitch, 2005b).
Similarly, Smilor (2004) pointed out that the entrepreneurial process is centered around learning.
Successful entrepreneurs are exceptional learners who take advantage of every learning
opportunity. As a result, they are both innovators and practitioners who emphasize learning from
everyday practices.
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Research regarding learning from entrepreneurial failure emerged more than fifteen years
ago (Shepherd, 2003). Since then, the field has been gaining momentum. Research has shown, as
was first emphasized by Shepherd (2003), that failure creates possibilities for learning but also
presents a challenging learning environment. The overview of qualitative research by
Amankwah-Amoah et al. (2018) and Cope (2011) offer intriguing insights into the learning
mechanism, however, a majority of research focuses on the influence of specific single factors on
learning from failure. These factors include personality traits such as narcissism which creates
cognitive and motivational obstacles to learning and present greater implications when the costs
associated with failure are high (Liu et al., 2019). Another factor is the individual’s initial
knowledge as Politis and Gabrielsson (2009) established that previous start-up experience is
strongly associated with a more positive attitude towards failure. Moreover, business closure
resulting from poor performance is a highly useful source of learning as opposed to business
closure due to more personal reasons which may not produce the same learning (Politis &
Gabrielsson, 2009). The factor of attributing failure to a particular cause also influences learning.
In this regard, Yamakawa et al. (2015) established that the internal attribution of blame for
failure results in positive learning and growth of subsequent entrepreneurial ventures.
According to Cope (2011), recovering from failure is a learning process with a variety of
higher-level learning outcomes possible. Entrepreneurs can gain a better understanding of
themselves through failure. Self-reflection is very important for entrepreneurs since it enhances
their network expertise, interpersonal skills, and venture management abilities. Therefore, self-
reflection will boost entrepreneurs' chances of success in their upcoming endeavors. A dynamic
relationship exists between entrepreneurial failure and success (Coelho & McClure, 2005).
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Entrepreneurs learn from setbacks and develop more realistic expectations of what they can
accomplish and how they should persevere in the face of uncertainty.
Learning from failure occurs at both individual and organizational levels (Wang &
Chugh, 2014). This concept is further extended by Cannon and Edmondson (2001) who
distinguished between the individual and organizational learning barriers. At an organizational
level, the barrier to learning is the risk of being stigmatized and the apprehension of losing
compensation and future possibilities within the organization, in contrast to learning barriers like
self-efficiency and low self-esteem at the individual level. Organizational leaders should
encourage their staff to learn from mistakes and have an extraordinary attitude toward failure in
order to reduce these learning obstacles. Furthermore, leaders play important responsibilities in
safeguarding the psychological health of their subordinates when a failure occurs in order to
ensure that subordinates are motivated to learn from failure and ultimately improve their
performances (Hirak et al., 2012).
Learning from the failure of an entrepreneurial endeavor has been explored through
psychological and cognitive perspectives. In the context of the psychological perspective, the
role of grief is important to consider. Grief has the potential to obstruct how the human mind
processes information, which could be an obstacle to learning. Entrepreneurs' emotional
interference with learning lowers to a point where learning can take place only once they have
overcome their loss. Entrepreneurs start to learn when they gather data and consider the causes of
failure. Entrepreneurs can have a greater grasp of their prior choices and actions with the aid of
this learning process. Additionally, it assists them in expanding their expertise in successful
corporate management. However, the pain of failure has an impact on how people learn and
develop their entrepreneurial roles. Since entrepreneurs are business proprietors, they will
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probably take their company's failure personally, which frequently causes anguish. Entrepreneurs
learn differently from the grief of a company loss as compared to grief from a personal loss even
the loss of close relatives. While the loss of a loved one results in “highly philosophical and
existential” learning, the loss of business results in learning that is increasingly “practical and
constructive” (Shepherd, 2003b, p. 320).
In the context of cognitive perspectives, research indicates that failure results in the
improvement of the entrepreneur’s ability to recognize an opportunity. This enhanced
opportunity recognition can be attributed to the increased use of mental structural alignment.
This cognitive tool enables effective comparison and evaluation of consequences. The cognitive
structural alignment not only improves the identification of new opportunities but also the
evaluative skill to assess the advantages of the probable new venture. This evaluation enables the
entrepreneur to better match the product and services to the target market’s requirements
(Mueller & Shepherd, 2016).
Summary
This literature review has covered shed light on the contemporary theories of
entrepreneurship, leadership, entrepreneurial leadership, failure, and learning. The two broad
concepts of this study are entrepreneurship and leadership. By narrowing down the discussion
about these two constructs, the concept of entrepreneurial leadership is presented as it is one of
the central aspects of entrepreneurial success. Since leadership plays a central role in dealing
with the challenges of a new startup venture, incompetence in this aspect may lead to venture
failure. This concept leads to two important subcategories namely entrepreneurial failure and
learning. By presenting the previous literature, a definition of failure has been established in the
context of entrepreneurship along with its probable causes and effects. A review of the literature
54
indicated learning is a central aspect of the entrepreneurial process. This learning takes place as
the attitudes and actions of entrepreneurs alter as a result of failure. Entrepreneurial learning
leads to reflection, which enables entrepreneurs to lead their organizations more effectively in
the future. Since risk is the central element of entrepreneurial activity, emergencies such as the
pandemic exacerbate the risk factor. Keeping this in view, the effect of the pandemic on business
owners, leadership, and their learning is also discussed.
The next chapter presents the method of research used in this study in detail. This will
indicate the guidelines and the framework that guide this research. The upcoming chapter will
also describe how data sources were selected and define the unit of analysis. The chapter
explains the design of the interview guide which was used as a tool for data collection.
Moreover, a description of reliability and validity of the instrument is presented with other
procedures and protocols of data collection. Lastly, a description of the process of analyzing data
and interpreting the results is also highlighted.
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Chapter 3: Methodology
Introduction
The present chapter of the dissertation explains the methodology used in this study. A
comprehensive description all of the methods used to conduct this research are also presented
that indicate the guidelines and the framework of this study. Moreover, the chapter describes the
process for the selection of research participants and defines the units of analysis. The chapter
presents the tool for data collection, the reliability and validity of the data collection tool, and the
process of gathering data. Lastly, the chapter describes the process of analysing data.
Restatement of Research Questions
This study was guided by three research questions:
• What are the causes of the failures entrepreneurs explain?
• What are the psychological, emotional, social, and financial impacts of failure?
• What lessons can entrepreneurs learn from failures?
Research Methodological Approach and Study Design
It is essential to outline the structure or research design for the logical flow of any
research. The research design is essential in ensuring that the evidence obtained enables us to
answer the initial question as unambiguously as possible (Vaus & Vaus, 2013). It is based on a
series of systematic steps that maintain the integrity of the study by guiding data collection and
analysis (Creswell & Creswell, 2018). Research methodology or paradigm provides the
philosophical foundation for any research. The word paradigm is of Greek origin, and it means
pattern. The term research paradigm was first used by Kuhn (1962) in the context of a
philosophical way of thinking. According to Kivunja & Kuyini (2017), the term paradigm is also
used to describe perspective, or thinking, or school of thought, or set of shared beliefs, that
56
informs the meaning or interpretation of research data. The research methodology or paradigm is
central to any research, and it is based on different steps that inform the research procedure. This
process provides a structure to the research and creates a link between research outcomes and
questions while directing the exploratory process, instrumentation, data collection, and analysis
(Zukauskas et al., 2018).
For the selection of an appropriate research methodology four major research factors
must be carefully considered. First, the researcher must consider the problem at hand. Second, it
is important to consider the intention of conducting any research. The third factor that must be
considered is the theoretical framework for the research. Lastly, it is important to outline the type
of data that the researcher may collect for the problem under study (Roberts, 2010). Keeping
these four factors in view, the present study used a qualitative research design. By employing a
“phenomenological approach”, the researcher aimed to explore the leadership lessons learned
from entrepreneurial failure.
Qualitative Research Method
Qualitative research is an umbrella term that encompasses wide-ranging philosophies and
techniques. In the broadest terms, it is an approach that is used to explore people’s experiences
through the use of research methods that aim to gather in-depth information. Common examples
of qualitative research methods include interviews, focus group discussions, observations,
content analysis, visual methods, and life histories or biographies (Hennink et al., 2020).
Qualitative research differs from quantitative methods which aim to test theories by exploring
the relationship between different variables. In contrast, qualitative research focuses on
understanding, explaining, discovering, and exploring particular situations, peoples’ perceptions,
attitudes, beliefs, values, and experiences (Kumar, 2018). An essential part of the qualitative
57
research approach is the interpretation of non-quantitative data by the researcher. This data may
be in the form of interview transcripts, field notes, artifacts such as photographs, recordings, or
biographical notes. Another important aspect of qualitative research is that it tends to take place
in the natural settings of the participants. This enables the researcher to search for the meaning of
certain phenomenon and interpret it as it occurs (Creswell & Creswell, 2018).
This study aimed to study the experiences of entrepreneurs who had faced failure and the
learning that takes place as a result of failure. Moreover, the study focused on entrepreneurial
failure, especially during the pandemic, and established the actions taken by entrepreneurial
leaders to lead their organizations in the midst of failure. Therefore, a qualitative research design
was a suitable approach for this study.
Phenomenological Approach
A phenomenological approach is used to describe the meaning of a phenomenon or a
concept based on the lived experiences of several individuals (Creswell & Creswell, 2018).
According to Manen (1990), the phenomenological approach is aimed to condense individual
experiences into a universal essence. This is done by exploring the individual experiences and
attempting to grasp the very nature of the phenomenon or the concept. Moustakas (1994)
explains the concept of phenomenological research design as an approach that enables the
researcher to develop composite descriptions of what and how individuals experienced a
particular phenomenon. These descriptions are formulated by collecting data from people who
have lived that experience (Creswell, 2007). After collecting detailed data on individual
experiences, the researcher aims to identify the commonalities that exist between these
individual descriptions of a lived experience (Darling, 2012).
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Keeping in view the benefits of the phenomenological approach, this study intended to
explore the phenomenon of failure in the context of entrepreneurship. By collecting descriptive
data from participants, the researcher then outlined the common grounds across participant
descriptions about entrepreneurial failure and learning.
Researcher’s Bias and Bracketing
Participants’ experiences are significantly impacted by consciousness, which plays an
essential role in qualitative research. Consciousness also plays an important role in an
individual’s perception of reality and interpretation of experiences (Creswell, 2007). Moreover,
the use of language is central to conveying information about the conscious experiences,
therefore, participants’ descriptions of the phenomenon were carefully considered by the
researcher. The overall essence of entrepreneurial failure was analyzed by the researcher by
audio recording the participant interviews (Creswell, 2007; Darling, 2012). The researcher’s
personal consciousness and ability to understand participants’ responses were also considered
during the interview process. To overcome any barriers to understanding, the researcher asked
follow-up questions to gain clarity of the participants’ viewpoints. The follow-up and
clarification helped in removing misconceptions and diminishing the chances of data
misinterpretation. It also enabled the researcher to thoroughly understand participants'
viewpoints about the phenomenon of entrepreneurial failure and learning.
Another important aspect of qualitative research is that researchers must not rely on a
predetermined theory or hypothesis while exploring the phenomenon under study. This is
because a predetermined idea may lead to influencing the research results due to the
researchers’ personal biases. Therefore, it is important to control such preordained
assumptions and biases (Creswell, 2007; Darling, 2012). Phenomenologists incorporate the
59
technique of bracketing to control these assumptions. This concept was first introduced by
Husserl (1931) and was further elaborated by Moustakas (1994). An important step in
bracketing is that researchers document any prior experience that they may have regarding
the phenomenon under study.
Data Sources
The selection of data sources requires careful identification of the research population
and the application of appropriate sampling methods to select the sample for the study.
Population and Sampling Processes
In any type of research, the choice of an appropriate sampling strategy is as essential as
the selection of a suitable methodology and instrumentation (Cohen et al., 2007). Sampling is
important as it helps the researcher in outlining the population for this study which can be
defined as a group of people that exhibit similar features that are congruent to the interest of the
researcher (Creswell, 2007). Numerous factors such as time, accessibility, and research cost may
present a challenge in data collection from the entire population, therefore, often the researchers
select a subset of the overall population. This subset is referred to as a sample that is selected in a
manner that is representative of the total population (Cohen et al., 2007). In qualitative research,
there is no strict regulation regarding the sample size. According to Patton (2002), qualitative
research can be conducted with the smallest sample size of a single individual. Dukes (1984)
asserts that for phenomenological research an ideal sample size consists of 3 to 10 participants.
These participants must have phenomenon-related experiences which serve as the primary
criteria for sample selection (Creswell & Creswell, 2018). For this study, the researcher selected
a sample size of 8 entrepreneurs selected through criterion sampling. This sampling method
enables the identification and selection of information-rich sources (Miles & Huberman, 1994).
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For the present study, the researcher selected participants based on the criterion that these
entrepreneurs have owned a business for at least three years. Secondly, they have employed at
least 5 employees at their enterprise. Moreover, participants were selected keeping in view that
they have an experience of failure in their entrepreneurial venture. By following the
predetermined criteria, the researcher selected participants for this study from personal and
professional networks. The Chamber of Commerce, Beijing is one such contact that was willing
to share the connection of its members. Individual emails were sent out to all participants
informing them about the purpose. Since the study involved non-English speakers, professional
translation of consent documents was sent to participants via email. The participants received the
translated consent forms and accepted the request by attending the interview. After the
fulfillment of the targeted sample size of 6-12 entrepreneurs, the selection process came to an
end. The emails were sent well before time to ensure that the participants can accommodate the
interview in their busy schedule.
Data Gathering Instruments/ Tools
The researcher developed 11 open-ended questions to collect sufficient data from the
participants through an in-depth interview. For each research question, the researcher included
interview questions that enabled the researcher to develop composite descriptions of the
phenomenon under study.
Research Question 1: How do entrepreneurs explain the reason for their failure?
Interview Question 1: In your opinion, what do you think is the meaning of failure?
Interview Question 2: Please describe any experiences of failures that you may have
experienced regarding your business venture.
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Interview Question 3: Do you think that the pandemic has impacted businesses? If so, please
describe your experiences during the pandemic.
Interview Question 4: Which factors do you think have impacted businesses the most?
Research Question 2: What are the psychological, emotional, social, and financial impacts of
failure?
Interview Question 5: Could you describe your psychological and emotional state during
and after the failure experience?
Interview Question 6: Could you describe how this failure impacted your social relations?
Interview Question 7: What do you think were the financial impacts of this failure
experience? How did this impact you and your company?
Research Question 3: What lessons can entrepreneurs learn from failures?
Interview Question 8: Describe some of the most important lessons that you have learned
through failure.
Interview Question 9: As a company leader, how do you think those failures have influenced
the way in which you lead yourself and your company?
Interview Question 10: How do you think young entrepreneurs can prepare themselves to
avoid failure, especially during unforeseen circumstances such as the pandemic?
Interview Question 11: Is there anything else that you would like to add?
Validity and Reliability of Instruments/ Tools
Irrespective of the research structure or the paradigm being followed, the establishment
of validity is one of the most important aspects of any research as invalid research would lead to
worthless results (Cohen et al., 2007). According to DeVellis (2016), valid research is one that
correctly measures what it is intended to measure and presents an accurate description and/ or
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explanation of the real-life phenomenon that the researcher is interested in exploring. The
validity of a research instrument is the extent to which it measures what the researcher wants to
measure (Kumar, 2018). For the present research, the researcher ensured the validity of the
instrument by reviewing the interview questions in light of the feedback provided by the panel of
experts. The feedback highlighted any vague terms that may mislead or confuse the interviewees
and impact the validity of the instrument. To improve the clarity and precision of questions, the
language of interview questions was revised. Another psychometric measure that is essential in
gauging the adequacy of a data collection instrument is reliability. The term reliability can be
defined as the degree to which the measure of a construct is consistent or dependable
(Bhattacherjee, 2012). According to Kumar (2018), the reliability of an instrument is determined
by two important components: consistency and stability. An instrument that produces stable and
consistent measurements can yield accurate and predictable results (Creswell, 2007). According
to Lincoln and Guba (1985), reliability is important in establishing the trustworthiness of any
research. To establish reliability, the researcher conducted a pilot interview to get the practice. A
pilot interview can be used to address potential practical issues in the research procedures. It can
help identify flaws and limitations within the interview design that allow researcher make
necessary modifications. Moreover, to ensure that the interview process is not hindered by any
technological glitch, the one-on-one interviews were recorded using a digital audio recorder.
Prior to recording the interviews, participants were informed, and recording was done upon their
consent. The audio files were saved to the researcher's password-protected laptop, and the audio
files were deleted from the digital recorder. The researcher also arranged a backup device and
also ensured that the devices are fully charged and do not present any problems regarding voice
quality. Through these measures, the researcher attempted to gather consistent data recordings.
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Through the use of Iflytek software, the researcher created interview transcripts. To ensure the
accuracy of transcripts, each transcript was carefully reviewed and verified.
Data Gathering Procedures
The foremost step in the data collection procedure is the review of literature related to
entrepreneurship, leadership, and failure as presented in Chapter 2. This review helped in the
identification of gaps in the literature and led to the development of research questions and the
interview guide. This was followed by outlining the research population and selecting a sample
of 6 to 12 entrepreneurs. The researcher then sent out emails to each participant explaining the
purpose of the research along with the details of the research procedure, benefits, and any
potential risks. Moreover, the consent form to participate in the research along with the interview
questions was also sent via e-mail to apprise the participants about the interview structure. This
offered a chance for the participants to prepare for the interview. Once participants agreed to
attend the interview, either the face-to-face or online interview was arranged based on the
preference of the participants in accordance with their schedule and location. During the
interview, the researcher recorded the conversation and also made notes of any important points.
With the permission and consent of the participants, the conversation was audio-recorded using
the recording device of a digital recorder. The audio files were saved to the researcher's
password-protected laptop, and the audio files were then deleted immediately from the digital
devices used to record them. Through prompts and follow questions, the researcher gained
clarity about any ambiguous statements and allowed the interviewee to do most of the talking.
Throughout the interview, the researcher took on the role of a facilitator who encouraged
detailed descriptions of the phenomenon as experienced by the interviewees. The researcher
followed the interview protocols ensuring that the respondents felt comfortable. The participants
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were given breaks after each twenty minutes of the conversation. Participants were also informed
that if they feel anything uncomfortable, they could opt out of the study at any point of the study.
To put the participant's minds at ease and to ensure that they did not fear the interview, the
researcher began by asking a few getting-to-know-each-other types of questions. Approximately,
each interview lasted for about 60 minutes. During the interview, the researcher adhered to the
qualitative interview skills of authenticity and trustworthiness by keeping eye contact and
displaying that the researcher uses active listening with participants (Moodian, 2011). By
following these protocols, the researcher created rapport with the participants, encouraging them
to share their experience of entrepreneurial failure without judgment.
An important ethical consideration during any research is the maintenance of participants'
confidentiality. Keeping the participants' identities anonymous is one of the most important
responsibilities of any researcher. For the present research, the researcher prioritized participants'
privacy, and at no stage of the research, the participant’s personal information was shared with
anyone. The consent forms were not required to be signed and returned to protect participants
from any potential breach of confidentiality. For the returned consent forms, they were collected
electronically and stored in a passcode-protected laptop. The laptop was locked in a desk drawer
of the researcher when the researcher was absent. The researcher used a secure network with a
firewall to conduct the Zoom meeting. The Zoom meeting required passcode to join. Only the
participant received the passcode. Once the participant joined the meeting, the researcher locked
the meeting room to prevent any other interruption. The meeting was audio-recorded using a
digital recorder. The audio files were saved to the researcher's password-protected laptop, and
then the audio files were deleted from the digital recorder. The interview transcripts were labeled
by assigning a numerical value such as Participant 1, Participant 2, Participant 3, and so forth.
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Data collected through audio recording and note-taking were securely stored on a password-
protected computer and not shared publicly. The interviews were transcribed and coded only by
the researcher and audio recordings and notes were destroyed after the interviews were
transcribed. After the study was completed, the consent forms were destroyed. The protected and
locked data will be destroyed up to 3 years after the study is completed.
Human Subjects Consideration
For a phenomenological study, the protection of human subjects is an important ethical
consideration. For this purpose, the researcher adhered closely to the “Institutional Review Board
(IRB) policy at Pepperdine University”.
IRB Category of Research
For the present study, the researcher closely followed the rules outlined by the IRB of
Pepperdine University. The participant consent form is an important aspect of the IRB review
and it is aimed at protecting all human subjects from any potential risks. This form includes
various elements which are outlined below (Creswell & Creswell, 2018):
1. The participants are requested to take part in the research voluntarily.
2. At any point during the research, the participants have a right to withdraw from the study,
with or without any reason.
3. Prior to the interviews, the purpose of the study and the research procedure must be
clearly stated and communicated to the participants.
4. The participants must be communicated with any potential risks that may impact them
before conducting the interviews.
5. The benefits of conducting the research must be clearly stated and communicated to the
participants.
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6. The identities of all the participants must be kept confidential throughout the research and
after it.
7. The researcher and the participants must sign the consent forms.
The “IRB application package” was submitted to the IRB office at Pepperdine University
and interviews were planned after gaining approval.
Data Analysis Process
For this study, a phenomenological data analysis process was adopted to explore the lived
experiences of entrepreneurial failure and learning. The researcher used Nvivo 12 software.
Phenomenological data analysis enables a sense of novelty that produces descriptive and
information-rich data (Anderson & Spencer, 2002). Interview data were transcribed only by the
researcher. The researcher analyzed the data by bracketing his personal experiences. Specifically,
the researcher provided documentation covering his reflection on entrepreneurial failure. Thus,
this process enabled the researcher to hold an open attitude to concentrate on the participants’
experiences.
According to Creswell (2007), phenomenological data analysis involves the compilation
of data into several themes through coding and condensing the codes, and finally representing
the data in figures, tables, or a discussion. Next, the researcher abstracted the results with the
help of a qualitative coding software: the Nvivo 12 software. After listening, reading, and
analyzing every interview recording and transcript, the researcher formed codes for each
transcript line by line with single words, short phrases, or long sentences, organized data by
themes and categories, and then synthesized and summarized the data. The significant statements
were identified from each transcript and refined into themes aimed at answering the research
questions.
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Summary
Chapter 3 presented a detail of the research methodology. Keeping in view the purpose of
the study, a qualitative phenomenological approach was adopted. By using criterion sampling, 6
to 12 entrepreneurs were purposefully selected. These entrepreneurs had owned businesses for at
least three years, have 5 employees working for their enterprise, and have experienced failure in
their business venture. This qualitative study used interviews as the instrument for data
collection. The interview guide was based on 11 open-ended questions that corresponded to
research questions. The instrument was established by a panel of experts examining the interview
guide and providing feedback. The reliability of the data was ensured through pilot testing.
Through qualitative data analysis, the researcher coded the interview transcripts and identified
significant themes and statements which were used to answer the research questions. The
researcher also followed the IRB procedure to minimize any risk to the participants. Chapter 4 of
this dissertation will present the findings of this research.
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Chapter 4: Results
Introduction
As outlined in Chapter 3, this study employs a phenomenological research approach to
explore the failure experiences of entrepreneurs. Chapter 4 of this dissertation provides details of
the descriptive interview data collected from the participants. Moreover, the chapter presents the
analysis of data along with the findings drawn from the gathered information.
Demographic Information of Research Participants
This study aimed to explore the entrepreneurial failure experiences in China to establish
lessons that would guide leadership through the lessons learned from such experiences. For this,
the researcher opted for criterion sampling to select a sample of 8 participants who fulfilled
predefined criteria. Firstly, the participants in this research had to meet the criteria of owning a
business for at least three years. Secondly, they had to meet the criteria of employing at least five
employees at their enterprise. Lastly, participants were selected keeping in view that they had an
experience of failure in their entrepreneurial venture.
To begin the data collection process, the researcher sent out emails to 12 individuals
belonging to personal and professional networks. Within a week of sending the emails, the
researcher received a positive response from eight individuals. These participants signed the
consent forms and agreed to participate in the study, allowing the use of a digital audio recorder
to record the interview conversation. Interviews were scheduled between May and June as per
the availability of each participant. Each face-to-face interview lasted for about 60 minutes. The
entire interview process was guided by the interview protocol. After conducting each interview,
the transcript was sent to the interviewee for approval. All participants approved the transcripts
of the interview conversation.
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A detail of demographic information is presented in Table 1. The demographic
distribution of the participants highlights information about their gender, years of experience as
well as industrial association. Among the 8 research participants, 6 were males whereas 2 were
females. The average age of the study participants was 51 years, ranging between 39- to 64-year-
olds. The participants belonged to different industries in China and had an average
entrepreneurial experience of 21 years, ranging from 10 years to 29 years.
Table 1
Demographics Data of Participants
Respondents
Gender
Age
Business
Years
Qualification
Marital status
Respondent1
M
50
Media Advertising
15
Bachelor’s
Married
Respondent2
F
56
Import/export trading
29
High school
Married
Respondent3
M
51
AI
23
Master’s
Married
Respondent4
M
48
Semiconductor
19
Bachelor’s
Married
Respondent5
M
53
Electrical machinery
24
Master’s
Married
Respondent6
M
64
New energy
27
Bachelor’s
Married
Respondent7
M
53
Manufacturing
22
Bachelor’s
Married
Respondent8
F
39
Kitchen Appliances
10
Bachelor’s
Married
Data Analysis
The coding of the interview transcripts began after the approval of the interview
transcripts by the interviewees. The researcher abstracted the results with the help of a qualitative
coding software: the Nvivo 12 software. And a rigorous approach was adopted to code the
transcripts by reading each one at least three to four times. In qualitative research, coding refers
to the process of analyzing and categorizing data collected from interviews, observations, or
other sources. Coding involves systematically assigning labels or tags, often in the form of
keywords or phrases, to different portions of the data to identify patterns, themes, and concepts
(Adu, 2019). Saldana (2012) describes code as a word or a short phrase that represents and
captures the main idea, important aspect, or significant essence of a portion of data. This code is
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a means to summarize and evoke the key content or meaning of the data in a concise and
meaningful way. For this research, the process of coding was done by carefully reading each line
of the interview transcript and highlighting any words or phrases that could be indicative of an
important concept. These codes were recorded in the page margins as the researcher continued to
read and re-read the transcript. The same process continued for each page of the transcript.
The next step in the coding process was refining the codes. For this purpose, the
recordings were listened to once again by the researcher, the codes were reviewed, and any
unnecessary code was eliminated. The purpose of refining the identified codes was to ensure that
each code was representative of a key concept. Another important step taken to define the codes
was the participation of a neutral peer reviewer who did not have any prior association or
knowledge of this study. Peer reviewers play a crucial role in ensuring the reliability of coding in
qualitative research. Reliability refers to the degree of agreement or consistency between
different coders or reviewers in the coding process (Sattler et al., 2015). It is important to
establish high reliability to ensure the credibility and trustworthiness of the research findings.
When selecting a peer reviewer for coding in qualitative research, several attributes are
typically considered. Firstly, expertise in the research area or methodology is crucial, as the
reviewer should possess a deep understanding of the subject matter to effectively analyze and
interpret the data. The peer coder selected for this study was an experienced academic researcher
working at a university with appreciable experience in qualitative coding methods. Secondly, the
peer coder needed to maintain the confidentiality of the participants, as the peer code plays a
critical role in ensuring the integrity of the research process. For this purpose, the researcher took
several steps. Any information regarding participants’ identities was removed from the
transcripts before sharing them with the peer coder. Moreover, the peer coder signed a non-
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disclosure form to maintain confidentiality. The researcher held a face-to-face meeting with the
peer coder to review the coding results. Overall, the codes identified by the two reviewers were
mostly similar with some differences in the words used for labeling the codes.
Following the generation of codes, the researcher listed significant statements. According
to Creswell (2013), this step of the research is the horizontalization of the data. Horizontalization
involves organizing and presenting research findings in a way that allows for the exploration of
themes and patterns across different participants or cases, rather than focusing on individual
cases in isolation. It involves identifying commonalities, differences, and relationships between
various data points to gain a broader understanding of the research topic.
In this study, horizontalization was implemented by using Nvivo 12. Codes for each
question were listed in separate tabs. The researcher then analyzed the data from multiple
participants and compared their responses and experiences. The researcher identified common
themes, patterns, and key ideas across the participants’ data. By horizontally organizing the
findings, the researcher was able to explore the similarities and differences in participants’
perspectives, experiences, and opinions. After identifying the common responses, interviewees
with similar responses were counted. A statement was considered significant if it was
represented in at least four interviews. From these significant statements, the researcher created
larger clusters i.e., themes (Creswell, 2013). The following section presents the findings drawn
from significant statements and themes.
Findings
Chapter 3 of this dissertation presents a detailed overview of the instrument for data
collection. As indicated, 11 interview questions were designed corresponding to the 3 questions
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guiding this research. Table 2 presents an overview of these questions along with the interview
questions.
Table 2
Research Questions and Corresponding Interview Questions
Research questions
Corresponding interview questions
1. What are the causes of the failures
entrepreneurs explain?
➢ In your opinion, what do you think is the
meaning of failure?
➢ Please describe any experiences of failures that
you may have experienced regarding your
business venture.
➢ Do you think that the pandemic has impacted
businesses? If so, please describe your failure
experiences during the pandemic.
➢ What factors do you think have resulted in
failure the most?
2. What are the psychological, emotional,
social, and financial impacts of failure?
➢ Could you describe your psychological and
emotional state during and after the failure
experience?
➢ Could you describe how this failure impacted
your social relations?
➢ What do you think were the financial impacts
of this failure experience? How did this impact
you and your company?
3. What lessons can entrepreneurs learn
from failures?
➢ Describe some of the most important lessons
that you have learned through failure.
➢ As a company leader, how do you think those
failures have influenced the way in which you
lead yourself and your company?
➢ How do you think young entrepreneurs can
prepare themselves to avoid failure, especially
during unforeseen circumstances such as the
pandemic?
➢ Would you like to add to add anything else?
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The data analysis of interviewee responses revealed 22 significant statements. Table 3
presents the significant statements along with the frequency of responses counted by the
researcher.
Table 3
Frequency of Significant Statements
Interview Questions
Significant statements
n
1. In your opinion, what do you think is the
meaning of failure?
Self-reflection
Motivation for change
7
7
2. Please describe any experiences of failures that
you may have experienced regarding your
business venture.
Piracy/ malicious competition
Lag in Technology
4
4
3. Do you think that the pandemic has impacted
businesses? If so, please describe your failure
experiences during the pandemic.
Closure of business
Loss of international customers
4
5
4. What factors do you think have resulted in
failure the most?
External environment
Poor management
5
6
5. Could you describe your psychological and
emotional state during and after the failure
experience?
Anxiety
Sleep disruption
7
4
6. Could you describe how this failure impacted
your social relations?
Family support
Team opposition
5
4
7. What do you think were the financial impacts of
this failure experience? How did this impact you
and your company?
Lower revenue
Debt
5
4
8. Describe some of the most important lessons
that you have learned through failure.
National developmental needs
and policy changes
Technological innovation
Customer focus
6
7
6
9. As a company leader, how do you think those
failures have influenced the way in which you
lead yourself and your company?
Effective management system
Openness and team
communication
7
5
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Interview Questions
Significant statements
n
10. How do you think young entrepreneurs can
prepare themselves to avoid failure, especially
during unforeseen circumstances such as the
pandemic?
Anticipate risk and prepare in
advance
Persistence
Keep learning
5
4
7
In the following section, detailed findings through the responses to the interview
questions are presented. The section highlights the quotes from interviewees that helped in the
identification of significant themes. The first four interview questions correspond to the first
research question, the next three questions correspond to the second research question, whereas
interview questions eight to eleven correspond to the third research question.
Research Question 1: What are the causes of the failure entrepreneurs explain?
Interview Question 1. Following is the first question for interview: In your opinion,
what do you think is the meaning of failure?
In this context, two significant statements emerged i.e., reflection on self and motivation
for change. 7 out of 8 respondents reported that failure is a chance to self-reflect on the ongoing
practices whereas 7 out of 8 respondents reported that failure is an event that creates motivation
for change. Some typical responses from interviewees are presented below:
According to Participant 1:
Entrepreneurship is about going through fire and water which is filled with countless
risks and uncertainties. Failure is inevitable and a cornerstone towards success. The
experience of failure made me re-examine myself and found myself deviating from my
initial intention, deviating from the main road so that I could return to the right path.
Participant 2 responded:
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Times are moving fast, markets are changing fast, and the failures are often a reminder of
whether I'm keeping up with the market. Many times, there is no choice which forces me
to change. For example, I have to move the fashion shows online.
Participant 4 answered:
Failure forces us to break the old patterns and to rebuild. Otherwise, we will collapse.
The point of failure is to put people into desperate situations, then reflect and force
themselves to make huge changes.
Participant 5 responded:
The significance of failure is that it has given me a deeper understanding of my own
shortcomings, and my own lack of perception. At the same time, it gave me great power
to make changes. Without a bad defeat and hurt very badly, there is no power to make the
change.
Participant 6 replied:
Failure is also a kind of motivation, forcing companies to make adjustments, re-examine
themselves, look at the market, find new demand points, and sustainable development
points, and make every effort to make the transition.
Interview Question 2. The second interview question was as follows: Please describe
any experiences of failures that you may have experienced regarding your business venture.
In this context, two significant statements i.e., lag in technology and malicious
competition were identified. 4 out of 8 respondents reported that they had experienced failure
due to the lag in technology whereas, 4 out of 8 respondents reported that they had experienced
piracy/ malicious competition. Some typical responses from interviewees are presented below:
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Lag in Technology. Participant 4 answered:
After 2018, our revenue dropped significantly due to outdated technology, and customers
almost abandoned our products. And there were a large number of quality compensation
cases.
Participant 5 responded:
At the beginning, I started a factory to make the watch parts. I bought the equipment and
started to produce, but the technology required to produce this watch part was very high.
At that time, only the western hold the leading technology and their products were more
trusted and reliable. Later, there was a watch store in Shanghai that decided to try our
parts, but after they applied our parts in their watch, many of their watches sold were
returned. Because of our parts couldn’t maintain the required functioning so that the
watch couldn’t run well for long. Our partner suffered a big loss. And because of the
restricted technology level, we couldn’t guarantee our product quality and eventually
ruined our brand and lost the reputation and trust. This was a huge blow for us.
Participant 7 responded:
Because of lagging technology, the market was occupied by the western products for a
long time. To survive in such difficult situation, we have focused on developing a new
generations of glass fiber formula through enormous efforts in two years. And eventually
our products are gradually accepted by the market.
Piracy/ Malicious Competition. Participant 3 replied:
When we first started our business, the software we made was called "King of Words
98", but after the product was made, everyone said it was good, but no one bought it.
Because no one would pay for the original version, they all used the pirated version.
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Every week, thousands of sets of the pirated version were sold, while we were lucky to
sell a few dozen sets of the original one a week. As a student start-up company, we
needed channels for software products and needed to do marketing, and we did not have
the ability to market at that time, so we couldn't make profits and kept losing money.
Participant 8 stated:
I remember when I first started to make ignition guns when my ignition gun was one of
the best in the country, but then many manufacturers began to imitate me, and then they
began to play price war. From 12 yuan has been reduced to 3 yuan. Then I began to lose
money, and this situation has continued, resulting in a huge crisis in the company.
Interview Question 3. The third interview question was as follows: Do you think that the
pandemic has impacted businesses? If so, please describe your failure experiences during the
pandemic.
This question led to two significant statements. 5 out of 8 respondents reported that the
pandemic caused a closure of their business whereas, 4 out of 8 respondents reported that they
lost international customers as a result of the pandemic. Some typical responses from
interviewees are presented below:
Closure of Business. Participant 1 responded:
I think the impact is huge. For example, when the pandemic happened this time. We were
supposed to have more than 200 million dollars of revenue in cinema advertising a year,
and now that the cinema is closed, the revenue is suddenly gone. The original Chinese
New Year was scheduled to have 50 million dollars of advertising, and then 50 million
dollars of advertising was gone in a flash too because of the closure of the business.
Participant 2 answered:
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During the coronavirus pandemic, domestic and international fashion weeks were all
forced to cancel, and our latest design trends have to be hidden. Factories are unable to
receive orders for the latest fashions and stores are unable to supply new goods. Large
quantities of goods were hoarded.
Loss of International Customers. Participant 1 replied:
Because of the lockdown policy, people couldn’t move around. And the key is you don't
know where the end is. And then there's an international epidemic too, and international
clients are starting to pull their budgets out. We have lost a great number of international
customers.
Participant 2 answered:
Our foreign markets have suffered a huge impact too, especially in Europe and the United
States, where orders have basically shrunk.
Participant 3 answered:
During the pandemic, decreased market demand is the main pressure for the company.
Market sales have decreased significantly, existing orders have been delayed or
cancelled, and new orders cannot be obtained in the short term. Both domestic and
international customers lost significantly. This has led to a relatively large gap in the
company's capital chain, which cause series of problem including employee payroll and
rent payment.
Interview Question 4. The fourth interview question was as follows: What factors do
you think have resulted in failure the most?
For this question, two significant statements were identified i.e., management and
external environment. 6 out of 8 respondents reported that poor management and 5 out of 8
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respondents reported that the external environment has contributed to the failure of
entrepreneurial ventures. Some typical responses from interviewees are presented below:
Poor Management. According to Participant 1:
Out-dated management can be fatal. People are most unpredictable. Because there was no
good management mechanism or reward mechanism, the team member turnover rate was
very high. As a result, the development of the company was extremely unstable.
Participant 4 responded:
Lack of management had a great impact on us. I do remember that we don’t even have a
basic company inclusion system. There are only a few girls doing manual entries with
Excel tables. The document completeness rate is less than 7%. It has created great chaos.
Participant 6 replied:
Management issues: I think enterprises in different stages require different management
strategies and methods. When the company is small, they can all listen to me. But as the
development of enterprises to medium-sized, it needs to have mechanisms and systems to
regulate. We need to encourage the team to communicate together to make a decision.
Participant 8 replied:
After the first few years of rapid development, we found that the management could not
keep up, which led to basically no growth in sales in the latter years. Later, through
research, we introduced the Performance Excellence Model into the management of our
company. It enabled us to grow much faster and more stable.
External Environment. Participant 1 responded:
Unpredictable factors in the external environment, such as SARS in 2003 and the
Coronavirus pandemic have had a huge impact on the company.
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According to Participant 2:
The epidemic has prevented all of our offline fashion week events and commercial
promotions from taking place, and new designs from being launched. This is a huge blow
to our fashion industry.
Participant 7 replied:
The external environment is important. There are many uncontrollable factors in the
epidemic, and we have to stand at a higher level, not only at the enterprise level but at the
national level to face it. First, we must respond to the requirements of the state and the
government and cooperate with the government's policies. The second is that the factory
is determined not to have problems, requiring every employee to implement this point to
do a good job of protection from virus.
Common Themes: Research Question 1.
The researcher identified the common themes for research question 1 through the
responses of interviewees to interview questions 1 to 4.
These themes helped in answering the research question: What are the causes of the
failures of entrepreneurs? From the eight significant statements, three important themes emerged:
lack of effective management, unstable external environment, and technological backwardness.
Lack of Effective Management. The success of any organization is dependent upon
effective leadership and management which involves numerous moral and strategic decisions. In
this context, building human capital and remaining up to date with current managerial trends is
extremely important. As indicated by the responses to research question 4, lack of effective
management is an important contributor to entrepreneurial failure as some entrepreneurs
continued to rely on outdated management systems which resulted in high turnover and poor
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regulation. The impact of ineffective management was also observed in terms of decision-
making and communication.
Unstable External Environment. Changes in external factors such as social conditions,
economic upheaval, and political situations often lead to opportunities that must be realized by
perceptive entrepreneurs. However, an unstable external environment may lead to failure as
entrepreneurs may be unable to forecast outcomes accurately. This was evident in the responses
of entrepreneurs which highlight that an unstable external environment leads to failure in normal
as well as pandemic situations. The economic crisis is one of the common factors that has led to
the failure of entrepreneurs in both situations. Other factors highlighted in the interview
responses include governmental policies, the lockdown imposed by the pandemic, and
disruptions in the supply chain.
Technological Backwardness. The business outlook of today is characterized by
massive globalization, continuous change, and technological inventions. This requires businesses
to adapt their practices and adopt technological advancements to keep up with the rest of the
world. Due to the lack of a basic company inclusion system, one of the entrepreneurs had
employees relying on manual Excel entries with high levels of incomplete work and chaos.
Similarly, as some of the entrepreneurial ventures grew, the management could not keep up due
to a lack of an effective performance model. Similarly, during the pandemic another entrepreneur
struggled as offline fashion shows and promotions were halted, forcing a shift toward online
platforms.
Research Question 2: What are the psychological, social, and financial impacts of failure?
Interview Question 5. The following is the fifth question for interview: Could you
describe your psychological and emotional state during and after the failure experience? In this
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context, two significant statements were identified i.e., anxiety and sleep disruption. 7 out of 8
respondents reported that they suffered from anxiety whereas 4 out of 8 respondents reported that
they faced sleep deprivation as a result of their failure experiences. Following are some of the
responses from interviewees:
Anxiety and Sleep Deprivation. Participant 1 responded:
At that time, we had burnt our fifty million start-up funds, and I could not sleep every
night. Because almost out of capital, at that time, it felt not that the money was burning
out, and your youth is burned out too. The start-up funding was accumulated over ten
years, but it burned up in five months. Anxiety was all over my body.
Participant 2 replied:
During the pandemic, I felt very anxious to look for solutions and a new breakthrough as
soon as possible to break the current lockdown dilemma. Because at that time, the
pandemic seems never will end, if we don’t make quick adjustment, the company will not
hold for long.
Participant 5 answered:
I feel very anxious because we don’t have much chance. It is precious that they trust us
and choose our product. But we have not done a good job. It feels so frustrating to lose
this customer.
Participant 7 replied:
Of course, it can be very nervous, no matter good or bad, entrepreneurs had to make
decisions at that time. In fact, there was a lot of pressure and anxiety.
Interview Question 6. The sixth interview question was as follows: Could you describe
how this failure impacted your social relations?
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For this question, two significant statements were identified i.e., family support and team
opposition. 5 out of 8 respondents reported that failure had an effect on family support. Another
statement that emerged was regarding team opposition which was reported by 4 out of 8
respondents. Following are some of the responses from interviewees:
Family Support. Participant 1 answered:
My family and friends gave me absolute trust and support during my most difficult time.
Participant 5 replied:
I was already in a lot of debt, but my friends and family didn't leave me, but lent me
money, some 3,000 and some 5,000, to help me get through this difficult time. They have
given me great trust and support.
Participant 7 replied:
My family supported me a lot. They have confidence on me. When I wase very tired and
anxious, after I returned home, the company and comfort of the family could really relax
me, replenished my energy, and allowed me to focus more on work.
Team Opposition. Participant 2 responded:
Because of the lower revenue, we couldn’t afford everyone’s normal salaries and
compensations. It turned out that some of team members chose to leave.
Participant 4 responded:
The core team is nowhere to be found. The core team had forty people at the time, and
they started to oppose me and left, only three of them were left at the end.
Participant 6 replied:
At that time, there were a lot of complaints within the company, and many people raised
objections against me, and I personally was under a lot of pressure.
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Interview Question 7. The seventh interview question was as follows: What do you
think were the financial impacts of this failure experience? How did this impact you and your
company?
In this context, lower revenue and debt emerged as the two significant statements as 5 out
of 8 respondents reported lower revenue as a financial impact of failure whereas 4 out of 8
interviewees highlighted debt as a financial outcome. Some typical responses from interviewees
are mentioned below:
According to Participant 1:
The immediate financial impact of this failed acquisition was the stoppage of the stock
price. The market capitalization dropped by 90 percent. The start-up burned itself out,
and I personally was saddled with a high level of debt at the time.
Participant 4 stated:
The product basically died, revenue dropped significantly almost by half, a large number
of quality compensation cases, and customers demanded more than $20 million in
compensation. The company was running out of cash flow, and I had to borrow the
money from the bank to make up for it.
Participant 5 responded:
At that time, the five years of accumulated 200,000 yuan of start-up capital were lost. The
company was at the end of its rope. Besides our house, all that should be sold was sold.
And the debt was very high at that time.
According to Participant 6:
Profits fell dramatically, by fifty percent, to a loss in 2014.
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Common Themes: Research Question 2
The researcher identified the common themes for research question 2 through the
responses of interviewees to interview questions 5 to 7. These themes helped in answering the
research question: What are the psychological, social, and financial impacts of failure? From the
six significant statements, three important themes emerged: psychological impact, social
relationship impact, and financial impact.
Psychological Impact. Negative emotions are quite common when one encounters
failure. This was evident in the interview responses as entrepreneurs reported feeling anxious,
under pressure, and frustrated. These negative emotions often result in sleeplessness which
further exacerbates the psychological response. One of the entrepreneurs stated that the anxiety
was so severe that it seemed to completely take over the body. This anxiety often stems from the
uncertainty that accompanies a failure situation as one entrepreneur was unable to accurately
forecast the amount of capital required and ended up losing it within five months. Another
entrepreneur struggled with making decisions in such a high-pressure situation.
Social Relationship Impact. In terms of social relationships, personal as well as
professional networks must be considered as these relations often suffer negatively due to failure.
The responses to interview question 6 provided interesting insights as on one hand participants
reported an increase in support from personal relations including friends and family, whereas, on
the other hand, participants faced isolation from professional relations. As reported by one of the
participants, friends and family offered support by lending money and by building trust and
confidence. In contrast, one of the participants highlighted abandonment by the core team that
constituted nearly forty people at the beginning however, the entrepreneurial failure resulted in
opposition with only three people remaining at the end. Another participant highlighted the
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increased frequency of complaints within the company. Many of these complaints were
personally against the entrepreneur causing increased pressure.
Financial Impact.
Failure in any business venture results in heavy financial costs. The
economic impact of failure occurs both at individual and enterprise level. At the personal level,
entrepreneurs suffer a loss of personal fortunes. This was evident in the response is of research
question 7 as one of the entrepreneurs reported a 90% drop in market capitalization leading to the
startup burning itself out. Another participant lost his significant start-up capital. To overcome
these losses, the entrepreneurs borrowed money from the bank. One of the participants reported
that not only was there a personal burden of high debt but also the company began to lose stock
price while another reported that the company was in deep trouble, therefore, almost all personal
belongings were sold. This indicates that participants not only suffered financial impacts at a
company level but also at a personal level.
Research Question 3: What lessons can entrepreneurs learn from failures?
Interview Question 8. The following is the eighth question for interview: Describe some
of the most important lessons that you have learned through failure.
For this question, three significant statements were identified. 6 out of 8 respondents
highlighted the national developmental needs and policy changes. 7 out of 8 respondents
reported the need for technological innovation whereas 6 out of 8 respondents identified
customer focus as an important lesson that they learned through failure. Following are some of
the typical responses from interviewees:
National Needs and Policy Changes. According to Participant 3:
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It is critical to learn to work with the government and follow the national needs. Being
positive with government calls but at the same time don't get too close to any official
individually. Be politically wise in the right way.
Participant 4 responded:
What you do must be what the country needs, what society needs, what the people need.
Otherwise, no matter how good you are, or how much money your company makes, you
eventually will be wiped out.
Participant 6 answered:
Focus on national development needs, and policy changes, respond to the national call,
and serve the country to serve the people. Because when you serve the people, people
will pay it back. When you serve yourself, it will not last for long.
Technological Innovation. According to Participant 3:
We must hold the core technologies that are world leading. Turn the core technology
advantage into a product advantage, turn the product advantage into a business model
advantage into a customer resource advantage, and finally into a comprehensive
advantage.
Participant 6 replied:
Our development is highly relying on the technological innovation. The introduction of
technical personnel, continuous improvement and perfection of product quality, the
technological innovation save us and help us reach the leading point. Technology itself
can become the core competitiveness of our company.
Participant 7 replied:
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Through technological innovation, we create intelligent production lines, improve
efficiency and continuously reduce costs. Constantly break through the technical barriers
is the must do things. It helps us always keep a leading position in this very competitive
business environment.
Participant 8 answered:
Doing independent technological innovation, having our own technology and own
patents, so that we will not be restricted by others, and we will not be stuck in the
development.
Customer Focus. Participant 1 responded:
These two years of failure to acquire Internet companies, it burned hundreds of millions
of dollars, and finally, we had to withdraw from the Internet market. Later we reflected
on the biggest problem behind is that our values have problems. That is, we have
forgotten what the original intention is. The business we were doing was good business
for all parties. For example, it is good for the property owner, for the consumer, and the
customer. It is a win-win situation for all parties. But then we forgot to create value. The
purpose of our acquisitions and mergers is essentially to cater to the capital market,
essentially for you to boost your share price. Make the P/E ratio higher, achieve a larger
market capitalization, and win a better self-reward. We did not follow the right road but
took the side road and fell below the cliff. Business only serves the purpose, and serves
the people, making money is just a passing thing. Once we are deviating from the people
or customer focus, we will be punished and even destroyed.
Participant 2 replied:
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Take deep research into the market and turn production orientation into market
orientation. We really value the customer’s needs and opinions. We believe that when the
market recognizes you and the customer accepts you, then you can do the production, and
you will succeed.
Participant 4 answered:
We are good at communicating with our customers, listening to feedback, and even
employing them as our quality monitoring ambassadors.
Participant 8 stated:
What we learned is that focusing on the customer’s benefits and providing the best
products for our customers is the only way that our company can survive and be
prosperous.
Interview Question 9. The ninth interview question was as follows: As a company
leader, how do you think those failures have influenced the way in which you lead yourself and
your company?
For this question, two significant statements were identified. The effective management
system was a significant statement identified in 7 out of 8 interview transcripts. Additionally, 5
out of 8 participants emphasized that the failure has influenced them to be more open and
improve their team communication. Participants talked about the impact of Western management
systems that influenced the way they lead themselves and their company. The Western
management system made them reflect on the Chinese management philosophy. Some typical
responses from interviewees are presented below:
According to Participant 1:
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I think it is very important to pay attention to grasp the hearts and get insight into the
needs and personal growth of team members, enhance communication, and be able to
achieve a mutual win-win. Applying scientific team members’ rewards and support
systems so that employees have strong this bonding can be so important to us. Incentive
mechanism to build this stronger link with team members.
Participant 2 responded:
We began to learn all the Western management theories but practice for a long time
found that the theory is useful but inappropriate in many places, in fact, China's culture is
vast and profound, and Chinese culture behind, I think it is the traditional Chinese
philosophy. Such Eastern philosophy is even more useful. Therefore, we think combining
Western and Eastern management would be best for us. For example, the core of
Oriental management is the idea of integration. For example, this piece of clothing itself
is a blend of a variety of Chinese and Western elements.
Participant 3 answered:
In the beginning, I thought the team members all trusted me, and I set it up for everyone
to do it. And later when the company grew up, this is not enough and efficient. We need
to set up a strategic discussion system so that we can understand more about why we
choose to do this so that we can be more unified in this goal. And the team strengthens
this link.
Participant 4 replied:
Establishing a suitable and efficient management system could be key to our
development. Re-establish the management system according to the strategic objectives
and establish standardized norms and processes.
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I think a technology company should focus not only on technology but on the
management of technology.
Introduce the world's advanced scientific management process. Establish a scientific
decision-making mechanism. Collective discussion, and review of the mechanism of
decision-making.
Participant 6 responded:
In the past, our management model was a pyramid model, from the chairman director,
and other management from the top to the bottom, but it didn’t work well right now. Now
is an inverted pyramid, there is the top serving the bottom, the chairman serving the
director, and the director serving the heads of departments. The people above serve the
people below. Now it is called empowerment. It really helps the team to become much
more positive and encouraged.
Participant 8 answered:
A management system that is suitable for Chinese characteristics, which combines
Confucian culture into the Western management system, the management model of the
East and West. Because a completely Western management effect is not good, because
we can introduce the surface of the Western methods and systems, but cannot introduce
their religion and faith, because the management needs two legs to go, one is the staff's
faith values, one is the system of management. The management system without faith and
values is only skin deep. It is difficult to integrate. Therefore, the Western management
system needs to have Chinese values to coordinate.
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Interview Question 10. The following is the tenth question for interview: How do you
think young entrepreneurs can prepare themselves to avoid failure, especially during unforeseen
circumstances such as the pandemic?
For this question, three significant statements were identified. 7 out of 8 respondents
reported that continuous learning emerged as the most important way in which young
entrepreneurs can prepare themselves to avoid failure as all respondents highlighted it.
Moreover, 5 out of 8 respondents believe that young entrepreneurs can avoid failure by accurate
forecasting and preparation in advance, while 4 out of 8 respondents highlighted the importance
of persistence in facing failure. Some typical responses from interviewees are presented below:
Anticipate Risk and Prepare in Advance. According to Participant 1:
It's important to plan ahead. We made the digital wave in the previous years. Otherwise,
this time all communities were closed, and then so many neighborhoods were not easily
accessible to each other that you couldn't change the publication to change the advertising
content. Now all our screens are internet online. So, the epidemic is a watershed, and
companies without the ability to innovate will fade out of the market. Companies that
rely on resources tend to be more stable, and companies that rely on manpower tend to be
more uncontrollable.
Participant 3 responded:
Prepare in advance for any possible changes. Because now the environment is highly
unpredictable in terms of a national and international environment. It’s better to become
sensitive and get prepared for any possible changes.
Participant 5 answered:
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See the risks in advance and prepare for them. We have experienced several bottlenecks
during the development, and sensing the problems in time to find solutions quickly is the
key.
Participant 7 replied:
Prepare in advance for a rainy day. Prepare in advance for future challenges that have
not yet emerged or are about to emerge. What may have to happen, and if it does, what
do we do next to respond to it.
Continuous Learning. According to Participant 2:
Learning is a must-do for a business leader and cannot be abandoned at any time. If you
give up, you risk being empirical. The moment you give up learning, your business may
come to a halt. Focus on learning, if you don't learn, you are not capable and qualified to
lead such a large enterprise in such a complex situation. I recently re-learned Mao
Zedong's theory of practice, contradiction, and the theory of protracted war. And asked
the leadership team to learn. Most of the cadres are too busy with business instead of
paying attention to learning, which leads them not to recognize the essential problems.
Participant 3 responded:
The ability to learn is very important. We must have an open mind, this open mind on the
one hand to learn themselves, on the other hand, to choose than good mature shareholders
and investors, so that others planted the heel to become their own experience, so that
others' mature methods can be applied faster in our company.
Participant 5 replied:
Benchmarking learning, to see other companies doing well in the industry, to learn their
methods and their mechanisms.
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Participant 6 answered:
We cannot stop learning. We must keep learning newer and more mature management
processes and strategic thinking methods.
Participant 7 answered:
On the one hand, we see the difficulties, on the other hand, to be able to see the
opportunities and then learn from them. I think it is often the year of difficulties, the year
of low tide is the year of investment. During the epidemic, we invested 100 million to
plan for new development opportunities.
Persistence. According to Participant 1:
Entrepreneurship is like a walk on a cliff and always having a close brush with death.
Young people should know how to persevere especially in the difficult time. Uphold the
spirit of nothing to lose. We originally started the business with our bare hands, and even
if we lost, what is the big deal to start again? I think that as long as you do everything you
can to go on, just do it, and finally, you will find that things will always come through.
We'll cross that bridge when we come to it.
Participant 3 responded:
Decide your own direction. This direction must be that you love it yourself and that
nothing can stop it. Anything cannot be done overnight, there will be all kinds of
difficulties, if not from the heart of love, you can’t be able to study thoroughly about
possible future risks, and what methods to deal with, and finally, you can’t go through it.
Common Themes: Research Question 3
The responses to interview questions 8 to 10 helped the researcher in identifying the
common themes for research question 3. These themes helped in answering the research
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question: What lessons can entrepreneurs learn from failures? From the eight significant
statements, the researcher developed five important themes. These themes can be divided into
two categories. The first focuses on the context, specific to China, and includes an effective
management system that combines Chinese and Western management philosophies, and national
development needs and interests. The second focuses on leadership and includes leading by
example, continuous learning and innovation, and preparing by planning ahead.
Effective Management System. Combining management philosophies from different
cultures, such as Chinese and Western philosophies, is important as each management
philosophy brings its own strengths and weaknesses. By combining philosophies, entrepreneurs
can benefit from the strengths of multiple approaches and create a more comprehensive and well-
rounded management strategy. The central idea emerging from the participants' responses to
interview question 9 is the importance of combining Chinese and Western management
philosophies to achieve effective management. The participants believe that simply adopting
Western management theories is not sufficient in the Chinese context, as China’s culture and
philosophy play a significant role in shaping management practices. Participants emphasized the
need to understand and meet the personal needs of team members, build strong relationships, and
implement incentive mechanisms. Integrating Chinese culture and philosophy with Western
management is seen as valuable for a comprehensive approach. Strategic discussions and goal
alignment, as well as the establishment of efficient management systems, are also emphasized.
The concept of an inverted pyramid management model, where leaders serve and empower their
subordinates, is introduced to foster collaboration and motivation. Lastly, participants stressed
the need for a management system that incorporates Chinese values and Confucian culture to
provide a foundation of faith, values, and coordination.
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National Development Needs and Interests. In the context of China, the central theme
of national development needs and interests revolves around aligning one's entrepreneurial
pursuits with the country's priorities and serving the needs of society and the people. Responding
to interview question 8, the participants emphasize the importance of working in harmony with
the government, while maintaining a cautious distance from individual officials. Entrepreneurs
must be politically astute, understanding the government's direction and responding positively to
national calls and policy changes.
Leading by Example. Effective leaders lead by example and empower followers in the
process. One central idea that emerges from the participants' responses is the importance of
leading by example. The participants emphasize the need for entrepreneurs to set a positive
example through their actions and behavior, demonstrating values such as trust, communication,
integration, and empowerment. They highlight the significance of building strong bonds with
team members, understanding their needs and personal growth, and fostering effective
communication and collaboration. This is evident in the entrepreneurs’ response to interview
question 9 as one participant stresses the importance of grasping the hearts of team members by
creating mutual win-win situations. Another participant highlighted the importance of leading by
example by embracing diversity and incorporating different cultural elements into their
management practices. Moreover, entrepreneurs should lead by example by integrating values,
such as faith and values, into their management practices, creating a harmonious and effective
organizational culture.
Continuous Learning and Innovation. Continuous learning and innovation are crucial
for entrepreneurs for several reasons. Firstly, in a rapidly evolving business landscape, staying
updated on industry trends, management processes, and strategic thinking methods is essential to
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adapt and make informed decisions. Secondly, learning from the experiences and successes of
others helps entrepreneurs avoid pitfalls and accelerate their own growth. Additionally,
technological innovation allows entrepreneurs to develop unique products and services, gain a
competitive edge, and expand their customer base. The need for continuous learning and
innovation is evident in participants’ responses to interview questions 8 and 10. In the context of
continuous learning, participants emphasize the need for entrepreneurs to never give up on
learning and to maintain an open mind as learning is essential for business leaders, and giving up
on learning can lead to stagnation. Another entrepreneur highlighted the importance of learning
from past leaders and theories to gain a deeper understanding of essential problems while another
mentioned benchmarking learning, which involves observing successful companies in the
industry and learning from their methods and mechanisms. This approach allows entrepreneurs
to adapt proven strategies to their own businesses. In terms of technological innovation,
participants emphasize the significance of holding core technologies that are world leading. They
stress the transformation of technological advantages into products, business models, customer
resources, and comprehensive advantages. This approach ensures independence and avoids
restrictions from external entities, fostering continuous development.
Preparing by Planning Ahead. Planning ahead is important for entrepreneurs because it
allows them to anticipate and prepare for future challenges and changes in the business
landscape. By proactively identifying potential risks, entrepreneurs can develop strategies to
mitigate them, thereby minimizing the impact of failures. The importance of planning ahead is
evident in interviewees' responses as one entrepreneur emphasized the need for innovation and
adaptation to the changing digital landscape. By planning ahead and embracing the digital wave,
companies can ensure their survival in the market. This suggests that entrepreneurs should
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constantly plan for and leverage emerging technologies to stay competitive. Another
entrepreneur stressed the unpredictability of the national and international business environment
highlighting the need for entrepreneurs to be sensitive to potential changes and prepare
themselves accordingly. Another participant reinforced the idea of preparing for future
challenges that may arise. By planning for the unknown and being proactive, entrepreneurs can
better respond to unexpected situations.
Conclusion
In Chapter 4, the data collected from the 8 participants were thoroughly examined. To
address the research questions, a set of 11 open-ended interview questions was formulated. The
responses provided by the participants were analyzed using coding techniques, resulting in 22
significant statements. This was followed by categorization of these statements into eleven major
themes that directly addressed each research question. Table 4 presents a comprehensive
summary of the connections between the interview questions, participant statements, and the
themes identified for each question.
Table 4
Summary of Interview Questions and Themes Drawn from Significant Statements
Interview Questions
Significant statements
Themes
Research question 1: What are the causes of the failures of entrepreneurs?
1. In your opinion, what do you think is the
meaning of failure?
Self-reflection
Motivation for change
Lack of effective
management
Unstable external
environment
2. Please describe any experiences of
failures that you may have experienced
regarding your business venture.
Piracy - malicious
competition
Lag in technology
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Interview Questions
Significant statements
Themes
3. Do you think that the pandemic has
impacted businesses? If so, please
describe your failure experiences during
the pandemic.
Closure of business
Loss of international
customers
Technological
backwardness
4. What factors do you think have resulted
in failure the most?
External environment
Poor management
Research question 2: What are the psychological, social, and financial impacts of failure?
5. Could you describe your psychological
and emotional state during and after the
failure experience?
Anxiety
Sleep disruption
Psychological
impact
Social relationship
impact
Financial influence
6. Could you describe how this failure
impacted your social relations?
Family support
Team opposition
7. What do you think were the financial
impacts of this failure experience? How
did this impact you and your company?
Lower revenue
Debt
Research question 3: What lessons can entrepreneurs learn from failures?
8. Describe some of the most important
lessons that you have learned through
failure.
National developmental
needs and policy changes
Technological innovation
Customer focus
National
development needs
and interests
Effective
management system:
(Combining Chinese
and Western
management)
Leading by setting
an example
Continuous learning
and innovation
Plan ahead and get
prepared.
9. As a company leader, how do you think
those failures have influenced the way in
which you lead yourself and your
company?
Effective management
system
Openness and team
communication
10. How do you think young entrepreneurs
can prepare themselves to avoid failure,
especially during unforeseen
circumstances such as the pandemic?
Anticipate risk and
prepare in advance
Persistence
Keep learning
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The impact of entrepreneurial failure encompasses psychological, social, and financial
aspects. Anxiety and sleep disruption are common psychological and emotional states during and
after the failure experience. Failure also impacts social relationships, which may include both
family support and opposition from the team as significant factors. Financially, failure results in
lower revenue and accumulated debt, affecting both individuals and their companies. These
consequences highlight the importance of understanding the financial implications of failure and
taking appropriate measures to mitigate them.
In terms of leadership lessons learned from failure, several key points can be highlighted.
Firstly, there is a need to align with national developmental needs and policy changes.
Technological innovation and a strong customer focus are also recognized as crucial elements.
Moreover, the importance of effective management systems that combine Chinese and Western
approaches, along with leading by example, continuous learning, and innovation cannot be
ignored. Planning ahead and being prepared are essential strategies to overcome failure and
mitigate its impact. There is also a need for effective management systems, openness, and team
communication as lessons learned from their failure experiences.
To prevent failure, especially during unforeseen circumstances like the pandemic, it is
suggested that young entrepreneurs should anticipate risks in advance and take proactive
measures. Persistence, continuous learning, and staying adaptable are vital qualities for success.
Overall, these findings highlight the multifaceted impact of entrepreneurial failure and
provide valuable leadership lessons, emphasizing the importance of understanding the
psychological, social, and financial aspects of failure, as well as adopting effective management
strategies, embracing innovation, and being prepared for unforeseen challenges.
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The following chapter presents a detailed discussion of the major themes. Moreover, the
chapter presents the implications of the findings and outlines the limitations. Lastly, the chapter
provides the recommendations for future research.
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Chapter 5: Discussions, Implications, Recommendations, and Conclusion
Introduction
This study aimed to explore the experiences of failure among entrepreneurs in various
industries in China. The study used qualitative phenomenological research and three research
questions were developed to explore how failure impacts entrepreneurs and the lessons they
learned. To gather data, 11 open-ended interview questions were created and analyzed using
qualitative coding techniques.
From the coding process, 22 statements of significance were identified, leading to the
emergence of eleven major themes.
The significant themes for research question 1 were lack of effective management,
unstable external environment, and technological backwardness. The significant themes for
research question 2 included psychological impact, social relationship impact, and financial
influence. Lastly, the significant themes for research question 3 were understanding national
development needs and interests, effective management systems, leading by setting an example,
continuous learning and innovation, and planning ahead to be prepared.
This chapter provides a comprehensive discussion of each theme, connecting them to the
relevant literature reviewed in Chapter 2. The implications of the findings, limitations of the
study, and recommendations are also presented. Finally, the chapter concludes with a summary
of the study’s key insights.
Discussion
This section presents a detailed discussion related to the significant themes and places
them within the literature outlined in Chapter 2. This would help in developing a deeper
understanding of the research findings.
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Lack of Effective Management
Entrepreneurial failure and the lack of effective management are crucial topics that have
been extensively explored in the literature. The failure of entrepreneurial ventures is a prevalent
phenomenon, with a significant number of startups and small businesses unable to sustain their
operations and achieve long-term success. As indicated by the participant responses, lack of
effective management is an important contributor to entrepreneurial failure as some
entrepreneurs continued to rely on outdated management systems which resulted in high turnover
and poor regulation. The impact of ineffective management was also observed in terms of
decision-making and communication. These findings are supported by literature as effective
management encompasses a range of functions such as planning, organizing, leading, and
controlling, all of which contribute to the efficient and productive operation of a business
(Sternad, 2019). The literature further suggests that many entrepreneurs struggle with effectively
managing their ventures, leading to increased failure rates. In this context, one key aspect of
effective management is strategic planning. As stated by Participant 6, based on the stage of an
enterprise, the leader must implement appropriate strategic actions. This requires entrepreneurs
to develop a clear vision and set achievable goals for their ventures. Without proper planning,
businesses may lack direction and fail to respond to market changes and challenges effectively.
In addition, the literature highlights the importance of organizational structure and systems.
Entrepreneurs often face challenges in establishing appropriate structures that facilitate effective
communication, coordination, and decision-making within their organizations (Eisenmann,
2021). Implementing efficient systems for resource allocation, performance evaluation, and
financial management are crucial managerial functions that are essential for sustainable growth
and mitigating the risks of failure (Chiles et al., 2007). The lack of effective management can
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lead to poor financial performance, inadequate resource utilization, and an inability to respond to
market demands. This can create internal conflicts, hinder teamwork, and impede the
development of a strong organizational culture (Barney et al., 2011).
Unstable External Environment
The external environment encompasses various factors that are beyond the control of
entrepreneurs but can have a profound impact on their ventures. Changes in external factors such
as social conditions, economic upheaval, and political situations often lead to opportunities that
must be realized by perceptive entrepreneurs (B. J. Zimmerman, 2008). However, an unstable
external environment may lead to failure as entrepreneurs may be unable to forecast outcomes
accurately. In this context, participant 1 and Participant 2 identified the role of the pandemic in
contributing to the unpredictability of the external environment which prevented businesses to
run as usual and hindered all marketing activities. Participant 7 highlighted the state regulations
that had to be followed. An external factor that leads to entrepreneurial failure is the regulatory
and policy environment. Government regulations, tax policies, and legal frameworks can
significantly influence the success or failure of entrepreneurial ventures. A study by Klapper et
al. (2006) explores the impact of business regulations on the survival rates of new firms, finding
that excessive regulatory burden hampers entrepreneurial activity and increases failure rates.
Moreover, the availability and accessibility of financial resources also play a vital role in
entrepreneurial failure. Insufficient access to capital, high-interest rates, and limited funding
options can impede the growth and survival of entrepreneurial ventures. The impact of economic
recessions and financial crises on failure rates has also been extensively explored in the
literature. In this context, Autio et al. (2014) highlight the vulnerability of new ventures to
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economic downturns and the challenges they face in securing funding during such periods. This
was identified by Participant 7 who suffered from the subprime mortgage crisis of 2008.
Technological Backwardness
One key aspect of entrepreneurial failure related to technological backwardness is the
failure to recognize and capitalize on emerging technologies. This can lead to a loss of
competitive advantage and an inability to meet evolving customer demands. Participants of this
study identified that a lag in technology was a major contributor to the failure of their
entrepreneurial venture. Participant 4 cited an example that due to the lack of a basic company
inclusion system, employees relied on manual Excel entries. Such outdated practices led to high
levels of incomplete work and chaos. Research indicates that entrepreneurs who fail to embrace
new technologies may find themselves unable to retain their resource advantage and generate
outcomes of greater value (J. G. Covin & Slevin, 2017). As a result, they might fall behind their
technologically savvy competitors, resulting in declining market share and potential business
closures.
During the pandemic, this lag of technology was felt deeply by several entrepreneurs as
Participant 2 reported that all of their offline fashion shows were canceled and physical
promotional activities were halted. Similarly, as reported by Participant 8, a lack of an effective
performance management model also impacted the progress of their business as the impact of
technological lag can be seen in terms of operational inefficiencies (Udokporo et al., 2020).
Outdated technologies and processes can hinder productivity, hinder innovation, and increase
costs. Entrepreneurs who neglect to invest in modernizing their technological infrastructure may
face difficulties in streamlining operations and staying agile in a rapidly changing business
landscape.
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Psychological Impact
Negative emotions are quite common when one encounters failure (Cope, 2011c; Singh
et al., 2007b). The findings from this study also provide evidence of the overwhelming
psychological impacts of failure as 6 out of 8 entrepreneurs reported feeling anxious, under
pressure, and frustrated. These negative emotions also resulted in sleeplessness which further
exacerbates the psychological response. Cope (2011) states that the psychological consequences
of failure may manifest through the negative emotions of regret, anguish, embarrassment, shame,
rage, guilt, and fear of the future. Participants of this study also reported severe negative
emotions as according to participant 1, anxiety was so severe that it seemed to completely take
over the body. Participant 5 reported feelings of anxiety and frustration while Participant 7
reported anxiety, nervousness, and increased pressure. These feelings persisted and caused sleep
deprivation as entrepreneurs who fail, experience a sense of helplessness that lowers their belief
in their capacity to lead tasks successfully in the future (Shepherd, 2003c).
Social Relationship Impact
Cope (2011) and Singh et al. (2007) have explored the impact of failure on social
relationships. In this context, personal as well as professional networks must be considered as
failure impacts both types of relations. The participant responses provided interesting insights in
this regard, as on one hand participants reported an increase in support from personal relations
including friends and family, whereas, on the other hand, participants faced isolation from
professional relations. As reported by participants 1 and 5, friends and family offered support by
lending money and by building trust and confidence. In contrast, participant 4 highlighted
abandonment by the core team members that constituted nearly forty people at the beginning
however, the entrepreneurial failure resulted in opposition with only three people remaining at
107
the end. Similarly, participant 6 highlighted the increased frequency of complaints within the
company. Many of these complaints were personally against Participant 6 as partners and
employees raised objections, causing increased pressure. This highlights the need for failed
entrepreneurs to regain trust and rebuild the confidence of the team members (Cope, 2011c) .
Financial Impact
As stated by Cope (2011), financial loss is one of the most common consequences of
entrepreneurial failure. This was also reported by 7 out of the 8 participants of this research. The
impact of failure on finances occurs both at the individual and enterprise level. At an individual
level, entrepreneurs suffer a loss of personal fortunes. This was evident in the responses to
research question 7 as Participant 1 reported a 90% drop in market capitalization leading to the
startup burning itself out whereas Participant 4 reported a significant drop in revenue. Similarly,
participant 5 lost all the start-up capital, and Participant 6 experienced a significant drop of
nearly 50% in profits. Apart from these company-level losses, the entrepreneurs suffered
personal financial losses as well. Participant 1 became saddled with a huge amount of debt
whereas Participant 4 borrowed money from the bank to make up for the lost revenue.
Participant 5 experienced a huge loss at a personal level as apart from the house, every other
belonging was sold. This indicates that the failure of a business venture has great financial
consequences, not only at a company level but also at a personal level (Ucbasaran et al., 2013b).
Effective Management System
In the context of learning from entrepreneurial failure, an important lesson evident in
participants’ responses is the application of an effective management system that combines
management philosophies from different cultures, such as from China and the West. Research
indicates that implementing management practices from the two contexts results in a rich and
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progressive development of leadership concepts and strategies (Filatotchev et al., 2020). This
idea is discussed in detail by Participant 2 who argued that the profound and vast culture of
China follows the traditional Chinese philosophy which may not be in line with the current
management practices. Participant 8 discussed that implementing the Western management
system alone is ineffective as its values do not match the Confucian culture of China. This
culture stresses the importance of building strong relationships, maintaining social harmony, and
aligning with the broader societal context. These principles can be valuable for entrepreneurs in
terms of fostering collaboration, building trust with stakeholders, and navigating complex
business environments (Lin et al., 2018). The central idea emerging from the participants'
responses is the importance of combining Chinese and Western management philosophies to
achieve effective management. Participant 1 stated that it is important to focus on the
development of team members and to pay attention to relationship building while applying a
scientific reward system. Participant 2 supports a combination of Eastern and Western
philosophies whereas Participant 3 stressed the need for a strategic discussion system.
Additionally, participant 6 discussed a shift from the traditional pyramid model to the inverted
pyramid model that has empowered people within the organization.
National Development Needs and Interests
The theme of learning from entrepreneurial failure by understanding national
development needs and interests is highlighted by several participants, reflecting the significance
of aligning business endeavors with broader societal goals. Participant 3 emphasizes the
importance of working with the government and staying attuned to national needs. This aligns
with the existing literature, which highlights the need for entrepreneurs to establish positive
relationships with government entities while maintaining a certain level of political knowledge
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(Costa et al., 2023). The macro-environment of any business is regulated by certain social,
cultural, political, and legal factors that cannot be controlled by business owners. These factors
influence the developmental needs and interests of any nation as Aghion and Durlauf (2006)
assert that the interplay between political and economic factors shapes development outcomes.
They also emphasize the importance of political institutions, distributional conflicts, and policy
choices in determining a nation’s developmental needs and interests. The macro-environment is,
therefore, quite unpredictable as indicated by Participant 1 who reports that the SARs in 2003
and the recent coronavirus pandemic make the external environment unpredictable and have a
great impact on the company. The importance of the external environment is also highlighted in
the response of Participant 7 who reports that the uncontrollable factors of the epidemic are faced
not only at the enterprise level but also at the national level, therefore, it is imperative to respond
to the state and the government requirements while cooperating with the policies outlined by the
government. Similarly, Participant 4 emphasizes the necessity of meeting the needs of the
country, society, and the people and Participant 6 reinforces the idea that entrepreneurs should
prioritize national development needs, and policy changes, and serve the country and its people.
Scholarly research supports this viewpoint, emphasizing the role of entrepreneurs as agents of
change and contributors to national development (Hitt et al., 2012). By embracing the concept of
social responsibility and directing their efforts toward meeting societal needs, entrepreneurs can
build strong relationships with customers and stakeholders, fostering long-term loyalty and
sustainability. Understanding national development needs and interests also helps entrepreneurs
align their business strategies and goals with the larger objectives of the country they operate in,
fostering a positive relationship between their ventures and the national development agenda.
This alignment enables entrepreneurs to leverage various opportunities and resources provided
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by the government and society, leading to sustainable growth and long-term success. Participant
1 emphasizes the importance of this alignment by highlighting the importance of customer focus,
without which business not only lacks purpose but business owners will also eventually be
punished and even destroyed.
Leading by Example
Effective leaders lead by example and empower followers in the process. By setting a
positive example, entrepreneurs can inspire their teams, build trust, and create a culture of
ongoing learning and improvement (Lattacher & Wdowiak, 2020). One central idea that emerges
from the participants’ responses is the importance of leading by example. Participant 1
emphasizes the need for entrepreneurs to set a positive example through their actions and
behavior, demonstrating values such as trust, communication, integration, and empowerment.
Similarly, Participant 5 highlights the significance of building strong bonds with team members,
understanding their needs and personal growth, and fostering effective communication and
collaboration. This is evident in the entrepreneurs’ response to interview question 9 as participant
1stresses the importance of grasping the hearts of team members by creating mutual win-win
situations.
Continuous Learning and Innovation
Continuous learning is a vital theme supported by scholarly literature. Its importance can
be understood by the fact that all participants of this research highlighted it in their responses.
Participant 2 emphasized the necessity of continuous learning for business leaders, highlighting
that abandoning learning can lead to ineffective decision-making and hinder business progress.
This notion aligns with research by Baker and Sinkula (2007), who argue that continuous
learning enables entrepreneurs to adapt to dynamic environments and make informed decisions.
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Additionally, Participant 2's mention of re-learning Mao Zedong's theories indicates the
importance of drawing knowledge from diverse sources, as suggested by Weick and Sutcliffe
(2001) in their research on sensemaking. This continuous learning mindset allows entrepreneurs
to identify essential problems and find innovative solutions. Participant 3 underscored the
significance of having an open mind and learning from others. This aligns with the concept of
absorptive capacity discussed by Zahra and George (2002), which emphasizes the ability to
acquire external knowledge and leverage it for innovation. Similarly, Participant 6 emphasized
the need to continually update management processes and strategic thinking methods that are in
line with the concept of dynamic capabilities, which emphasizes the importance of adaptability
and learning in achieving competitive advantage (Teece et al., 1997).
Preparing by Planning Ahead
Planning in advance is a crucial aspect of learning from entrepreneurial failure, as
emphasized by the participants' insights. Participant 1 highlighted the importance of planning by
citing the example of the digital wave. By anticipating and embracing technological
advancements in advance, companies can adapt and remain competitive even during challenging
times like the epidemic. Various researchers such as Dutta & Crossan (2005) emphasize the need
for innovation and proactive adaptation to changing market conditions. Companies that rely on
resources and possess the ability to innovate are more likely to thrive in the market, while those
relying solely on manpower may struggle to remain adaptable and face increased
uncontrollability. Participant 3 reinforces the significance of preparing in advance for potential
changes. The dynamic nature of the national and international environment requires
entrepreneurs to be sensitive and proactive in their preparedness, highlighting the importance of
environmental scanning and proactive strategic planning to anticipate and respond to changes
112
effectively (Gibcus & Kemp, 2003). By staying ahead of the curve and being prepared for
various scenarios, entrepreneurs can navigate uncertainties and mitigate the negative impacts of
failure. Similarly, Participant 5 emphasizes the importance of risk assessment and preparation
whereas Participant 7 highlights the need to prepare in advance for future challenges that may
emerge. By considering various possibilities and developing contingency plans, entrepreneurs
can effectively respond to unforeseen circumstances.
Implications
Initiating an entrepreneurial venture is a challenging endeavor, particularly for young
entrepreneurs who often face numerous obstacles and uncertainties. However, the lessons
derived from experienced entrepreneurs regarding effective management systems, understanding
national development needs, leading by example, continuous learning and innovation, and
preparing by planning to carry significant implications for young entrepreneurs. These lessons
can provide guidance and help them navigate the complexities of entrepreneurship, especially in
the context of uncertain situations such as the pandemic.
Effective Management System
The implementation of an effective management system is of paramount importance for
young entrepreneurs, particularly in the current business environment shaped by the pandemic.
By establishing clear communication channels, young entrepreneurs can ensure that information
flows smoothly within their organizations. This involves adopting appropriate communication
tools. These tools encompass various project management software, platforms for video
conferencing, and instant messaging apps, to facilitate efficient and timely communication
among team members, regardless of their physical locations. In addition to communication,
setting up a remote work infrastructure is crucial for young entrepreneurs to adapt to the
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changing work dynamics brought about by the pandemic. This may involve providing employees
with the necessary technological resources and ensuring secure access to company networks and
data. By enabling remote work capabilities, young entrepreneurs can maintain business
operations even during times of lockdowns or restricted physical access to the workplace.
Furthermore, effective coordination among team members is essential for ensuring productivity
and collaboration in a remote work environment. Young entrepreneurs should establish
mechanisms for project management, task allocation, and progress tracking to keep their teams
aligned and focused. This can include the use of project management tools, shared calendars, and
regular virtual team meetings to maintain a sense of cohesion and accountability.
National Development Needs and Interests
Understanding national development needs and aligning business strategies accordingly
is essential as by recognizing and addressing the pressing needs of the nation, young
entrepreneurs can position their ventures to contribute to economic recovery, public health, and
societal well-being. During situations such as the pandemic, there are several areas where young
entrepreneurs can align their ventures with national development needs. For instance, they can
focus on developing products or services that directly address public health concerns, such as
manufacturing medical supplies, providing telemedicine solutions, or developing technologies
for contactless transactions. By catering to the health and safety needs of the population, young
entrepreneurs not only meet market demands but also actively contribute to the well-being of
society at large. Additionally, young entrepreneurs can explore opportunities to stimulate
economic recovery. This could involve creating job opportunities, supporting local supply
chains, or promoting sustainable business practices. By aligning their ventures with national
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economic goals, young entrepreneurs can drive growth, generate employment, and contribute to
the overall development of the country's economy.
Leading by Example
Leading by example is a critical leadership quality that young entrepreneurs should
embrace. Demonstrating resilience, adaptability, and empathy sets a powerful example for team
members and contributes to their motivation and engagement. When faced with challenges, a
young entrepreneur who exhibits resilience shows the team that setbacks can be overcome and
instills confidence in their ability to navigate through difficult circumstances. This resilience
serves as a source of inspiration and encourages team members to persevere and maintain a
positive outlook.
Additionally, adaptability is key during times of uncertainty. By being open to change
and willing to adjust plans and strategies as needed, young entrepreneurs can show their team
members the importance of flexibility and the ability to embrace new opportunities. This
adaptability creates an environment where team members feel empowered to explore innovative
solutions and make necessary adjustments to keep the business moving forward.
Continuous Learning and Innovation
Embracing a growth mindset and actively seeking opportunities to learn new skills and
acquire knowledge allows young entrepreneurs to stay ahead of the curve and adapt to the
rapidly changing business landscape. By continuously upskilling themselves, they can enhance
their competitiveness and seize emerging opportunities. Furthermore, exploring emerging
technologies has become essential for young entrepreneurs to stay relevant and innovative. One
outcome of the pandemic is the acceleration of digital revolution across industries, making it
imperative for entrepreneurs to leverage technology to optimize their operations, reach customers
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through digital channels, and explore new business models. Embracing emerging technologies
such as artificial intelligence, cloud computing, e-commerce platforms, and data analytics can
provide young entrepreneurs with a competitive edge and open up new avenues for growth. In
addition to skills and technology, adapting business strategies is crucial during the pandemic.
Young entrepreneurs need to be agile and flexible in their approach, constantly assessing the
market landscape and making necessary adjustments to their strategies. Entrepreneurs who
transform failure into a powerful learning experience can effectively seize it as an opportunity
for growth. Instead of being discouraged by setbacks, failure must be viewed as a stepping stone
toward success. Analyzing the reasons behind the failure helps entrepreneurs identify
weaknesses and areas for improvement and allows them to embrace failure with a positive
mindset, fostering resilience, adaptability, and a willingness to take calculated risks.
Preparing by Planning Ahead
Anticipating potential risks and challenges allows entrepreneurs to proactively develop
contingency plans to mitigate the negative impacts on their ventures. Conducting thorough risk
assessments allows entrepreneurs to identify and analyze potential threats to their business,
enabling them to devise strategies to address them effectively. Having a comprehensive
understanding of the potential risks enables young entrepreneurs to make informed decisions and
allocate resources wisely. By identifying the areas of vulnerability, they can develop backup
plans and alternative approaches to ensure business continuity. This proactive approach not only
minimizes potential disruptions but also enhances the resilience of their ventures. Furthermore,
planning allows young entrepreneurs to identify emerging opportunities that may arise amidst
uncertainties. By staying vigilant and analyzing market trends, they can position their ventures to
seize potential advantages and adapt their strategies accordingly. This adaptability and readiness
116
to pivot in response to changing circumstances can help young entrepreneurs stay ahead of the
competition and capitalize on emerging trends.
Looking for Support
When faced with failure, seeking emotional, social, and financial support can
significantly impact the entrepreneurial journey of young entrepreneurs. Emotional support plays
a crucial role in sustaining confidence and mental well-being. Entrepreneurial failure is
associated with feelings of depression and anxiety, therefore having a support system that
understands and encourages one's ambitions can be invaluable. Whether it is family, friends,
mentors, or fellow entrepreneurs, having people who believe in one’s vision and offer emotional
encouragement during tough times can help young entrepreneurs stay focused, motivated, and
resilient in the face of challenges. Secondly, social support is vital for young entrepreneurs to
expand their networks and access valuable resources. Interacting with individuals with shared
interests, participating in events that lead to networking, and being a part of entrepreneurial
communities allows them to exchange ideas, share experiences, and gain insights from others’
successes and failures. Building strong social connections can open doors to potential
partnerships, collaborations, and mentorship opportunities, leading to collective wisdom and
mutual support which is essential during failure. Lastly, the significance of financial support
cannot be overstated in the entrepreneurial journey. Many young entrepreneurs face barriers
when it comes to securing funding for their ventures. Having access to sufficient financial
resources can enable them to invest in critical aspects of their business, such as product
development, marketing, and scaling operations. Seeking financial support from angel investors,
venture capitalists, or crowdfunding platforms can be a game-changer for young entrepreneurs
117
facing financial challenges, providing them with the runway needed to turn their ideas into viable
and sustainable businesses.
Limitations
This study focused on specific entrepreneurs with experience of failed business ventures,
using a purposeful sampling strategy. As a result, the findings of this study may not be
generalizable to all entrepreneurs in China, as they are limited to the experiences and stories
shared by the selected 8 participants.
Another limitation of this study relates to the retrospective nature of the data collection
process. Participants were asked to recall past failures and reflect on what they learn from these
experiences. Due to the limitations of human memory, there is a chance of missing or distorted
information about these experiences. Therefore, the participants’ views on failure may have
evolved since the time of the study, as their life circumstances and perspectives may have
changed. Moreover, the research relied on subjective interpretation rather than objective
measurement. There may be differences in how various researchers interpret the same data,
leading to probable changes in findings.
Since this research primarily focuses on textual analysis, this means that it does not
provide the same level of statistical analysis as quantitative research. While qualitative studies
may use coding or thematic analysis to identify patterns and themes, they lack the numerical
precision and statistical significance found in quantitative research.
Recommendations
Expanding on What Entrepreneurs Do During Failure: This research focused more on
what entrepreneurs can do to avoid failure, especially in unforeseen circumstances such as the
pandemic. Future researchers can expand on what entrepreneurs do when they are experiencing
118
failure. Such what entrepreneurs can do to cope with failure adaptively and be able to adjust
quickly to move out of failure can be further addressed.
Expanding Methodological Approaches: This study utilized a qualitative
phenomenological research approach. In the future, researchers can use a combination of
different methods to study the problem of failure in entrepreneurial ventures. This broader
methodological perspective may provide additional insights and contribute to a more
comprehensive understanding of failure in the entrepreneurial world.
Larger and Randomized Sample: The present study collected data from 8 participants.
The selection of participants was guided by purposeful sampling and interviews were used to
gather data. Future researchers can enhance the validity and generalizability of their findings by
increasing the sample size and employing a randomized selection strategy. Collecting data from
a larger and more diverse group of entrepreneurs across China can help capture a broader range
of perspectives and experiences related to failure.
Comparing Different Groups of Entrepreneurs: This study did not compare the
perceptions and strategies of entrepreneurs who had one startup experience with those who had
multiple experiences. Future research can focus on the examination of the difference in views of
two groups about failure and if they employ different strategies when coping with and growing
from failure. Such comparative studies can offer valuable insights into the dynamics of failure
and leadership development within different groups of entrepreneurs.
Industry-Specific Studies: While this research included entrepreneurs from various
industries, future studies can explore failure within a single entrepreneurial industry. By
narrowing the scope to a specific industry, researchers can suggest more industry-specific and
hand-on advice on how entrepreneurs can cope with and learn from failure in their specific field.
119
This targeted approach can add to a better comprehension of failure dynamics within specific
industries.
Conclusion
This study aimed to study the incidents of failure among new business owners in various
industries in China. Qualitative phenomenological research was conducted, and three research
questions were developed to investigate how failure in entrepreneurial endeavors impacts
entrepreneurs and what lessons they learn from it. The data were gathered with the help of open-
ended interviews and analyzed using qualitative coding techniques. The coding process led to the
identification of 22 significant statements, which formed eleven major themes. The findings
highlighted the importance of effective management systems that encompass planning,
organizing, leading, and controlling functions. Strategic planning, proper organizational
structure, and efficient systems for resource allocation and financial management were identified
as crucial elements for sustainable growth and mitigating the risks of failure. Embracing
technological advancements and adapting to the changing market demands were also emphasized
as important factors in avoiding failure. Understanding the external environment, building
positive relationships with stakeholders, and aligning business endeavors with national
development needs were seen as essential for long-term success. Leading by example, fostering
continuous learning and innovation, and planning for potential challenges were also identified as
valuable lessons for entrepreneurs. The implications of the study suggest that young
entrepreneurs can benefit from the lessons learned by experienced entrepreneurs. Implementing
effective management systems, understanding national development needs, leading by example,
continuous learning and innovation, and preparing by planning can guide young business owners
120
in dealing with the challenges of entrepreneurship and increasing their prospects of success,
especially in uncertain situations like the pandemic.
Overall, the insights derived from this research hold immense value for aspiring and
existing entrepreneurs, not only within the research’s context but also globally. The lessons
highlighted through effective management systems, understanding national development needs,
leading by example, continuous learning and innovation, preparing by planning, and seeking
support resonate as crucial pillars for entrepreneurial success. The ever-evolving business
landscape, worsened by the uncertainties of a pandemic, demands an adaptable approach from
young entrepreneurs. The entrepreneurial world today requires not just ambition, but strategic
insight and a profound understanding of societal needs. In this context, establishing an effective
management system, embracing technological advancements, and fostering a culture of clear
communication can form the bedrock of a successful enterprise, especially in remote work
settings. Additionally, aligning business strategies with national development needs not only
fuels economic growth but showcases responsible entrepreneurship, positioning ventures as
contributors to societal well-being and recovery. Similarly, leading by example, exhibiting
resilience, adaptability, and empathy, sets a powerful precedent for teams, nurturing a positive,
flexible work environment crucial for navigating challenges. Meanwhile, continuous learning
and innovation, along with an agile approach to business strategies, are imperative to stay
competitive amidst evolving technologies and market landscapes. However, amidst the
entrepreneurial journey, recognizing the necessity of seeking support - emotional, social, and
financial - is paramount. The ability to acknowledge failure as a stepping stone toward success
and to look for guidance in challenging times is a testament to an entrepreneur’s strength and
determination. In essence, the lessons learned here are not confined by borders or circumstances;
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rather these findings can benefit entrepreneurs in countries other than China by providing them
with valuable insights into building and managing successful ventures. The application of these
principles is imperative to navigate uncertainties, drive economic growth, foster innovation, and
build businesses that positively impact both the entrepreneurs’ communities and the world at
large.
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APPENDIX A
Statement of Bracketing
In phenomenological research, a predetermined idea may lead to influencing the research
results due to the researchers’ personal biases. Therefore, it is important to control such
preordained assumptions and biases (Creswell, 2007; Darling, 2012). In this statement, the
researcher outlines his previous knowledge and experiences relevant to the research topic.
Culture is part of a person's identity and influences their behavior. Growing up in China, I
have lived in a society that greatly emphasizes success and individual achievement. In the
Chinese society, the wealth an individual accumulates or a higher official position in the
government that a person holds is an important measure of success. Most Chinese parents, on the
other hand, want to be risk-averse and prefer their children to obtain jobs that offer stability
rather than become entrepreneurs. They believe that the uncertainty and risks associated with
operating one's own business are more likely to lead to failure, whereas being employed at
someone else's company is considered a safer option. And parents usually believe that there are
many factors involved in doing business that are beyond the entrepreneur's control. Whether the
family has strong connections and background is an important factor. Traditionally, Chinese
society prizes success and despises failure. If you fail, regardless of the process, you are a failure.
Therefore it has put huge demend and pressure on entrepreneurs. As the matter of fact, most
Chinese entrepreneurs have to gain a wide range of talents. These include the development of
strategic thought, the ability to manage finances, business intelligence, and the ability to lead
teams, among others. Since China's business environment and traditional industrial chain are still
in process of completion and standardization, a number of challenges that arise in the
entrepreneurial process cannot be overcome by recruitment of people or the establishment of
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external cooperation. It is important that entrepreneurs develop the ability of problem solving at
an individual level in order to deal with the challenges regarding governmental policies, supply
chain management, investor relations, business advertisements, among others.
Over the past, I have been employed but two different companies. This gave me an
opportunity to observe the daily business operations. Both China-based companies enabled me to
acquire an understanding of business within my cultural context. One of these companies was a
media production company founded in 2008, whereas the other one was an educational
consultation firm that dealt with study abroad programs and cross-cultural student exchange.
This company was founded in 2012. A discussion with the company leaders of these two
companies regarding their experience of setting up their business ventures helped me to learn
from the stories that they generously shared. The experiences of both founders included stories
of success as well as failure. I was inspired by their stories, especially the way they coped with
failures. I realized gradually that every story brings with it a lesson from which something
valuable can be learned. In China, we hear more about the success stories of entrepreneurs and
how successful these great entrepreneurs have achieved, and how much wealth they have
created. But their failures and how they coped with them often seem to be overlooked. The
experience of entrepreneurial failure can provide useful learning for current and potential
entrepreneurs.
