Harsh Evaluations of Entrepreneurs Who Fail: The Role of Sexual Orientation, Use of Environmentally Friendly Technologies, and Observers' Perspective Taking

Abstract

Although there is a pervasive anti‐failure bias in society, we investigate why some entrepreneurs who fail are evaluated more harshly than others. Building on attribution theory and the literatures on prejudice, pro‐social intentions, and perspective taking, we offer an evaluation model of entrepreneurial failure and test this model on 6,784 assessments made by 212 observers. We find that variance in the harshness of failure evaluations depends on both the attributes of the entrepreneur and the attributes of the observer, and the interaction between the two. Specifically, entrepreneurs who are homosexual are evaluated more harshly by some observers and entrepreneurs who use environmentally friendly technology are evaluated less harshly. Moreover, observers high in perspective taking are more ‘lenient’ in their failure evaluations of those who use environmentally friendly technology than those low in perspective taking.

Motivation and Entrepreneurial Cognition

“…The higher a failure's financial costs, the higher the probability that others will notice the failure, often resulting in stigma for the individuals involved (Cardon et al 2011;Semadeni et al 2008;Sutton and Callahan 1987). For instance, our research (Shepherd and Patzelt 2015) showed that individuals with substantial financial losses as a result of failure are stigmatized more than those with lower losses. Stigma is a form of social stain as the individual being stigmatized experiences defamation that harms his or her reputation (see Cardon et al 2011;Shepherd and Patzelt 2015).…”

“…For instance, our research (Shepherd and Patzelt 2015) showed that individuals with substantial financial losses as a result of failure are stigmatized more than those with lower losses. Stigma is a form of social stain as the individual being stigmatized experiences defamation that harms his or her reputation (see Cardon et al 2011;Shepherd and Patzelt 2015). Ultimately, the social influence of stigmatized individuals diminishes significantly.…”

“…Again, prosocial motivation does not necessarily exclude benefits for the actor, but prosocially motivated individuals have a desire to aid others (Grant 2007;Grant and Berry 2011). Similarly, we (Shepherd and Patzelt 2015) proposed that although health entrepreneurship may create profit for entrepreneurs, it is also highly likely to improve others' health. Researchers have the opportunity to explore phenomena that can "make a difference" (health being the dependent variable) while simultaneously furthering their careers by publishing high-quality research with a deep impact.…”

“…However, since pursuing a potential opportunity is full of uncertainty (Knight 1921;McMullen and Shepherd 2006), numerous entrepreneurial undertakings fail (Burgelman and Valikangas 2005;McGrath 1999), which can result in negative financial (Lee et al 2007(Lee et al , 2011, emotional (Shepherd 2003;Shepherd et al 2011), and social (Efrat 2005;Semadeni et al 2008;Shepherd and Patzelt 2015) consequences for those involved (for a summary, see Ucbasaran et al 2013). Even with the pervasiveness of failure in entrepreneurship, McGrath (1999) contended that entrepreneurs and individuals who would have otherwise become entrepreneurs generally have an anti-failure bias.…”

Researching Entrepreneurial Failures

“…Beyond entrepreneurs' impressionmanagement strategies, do particular forms of failure and/or types of entrepreneurs cause greater stigma? For instance, Shepherd and Patzelt (2015) found that entrepreneurs who are homosexual are likely to be stigmatized more from business failure than those who are heterosexual (in one region of Germany) and that those who are trying to preserve the environment are stigmatized less for business failure than those who were not trying to preserve the environment. Perhaps female entrepreneurs in supposed "masculine" industries (or masculine organizations or roles) face more stigmatization from failure compared to women in "feminine" industries (or organizations or roles) or men in "masculine" industries (or organizations or roles).…”