Objectives: In this paper, we seek to understand business failure of young technology-based enterprises from a learning perspective. We use a dynamic perspective on entrepreneurial learning proposed by Cope (2005, 2011), which puts emphasis on the processual nature of learning and addresses learning in the context of critical life experiences.
Prior work: Entrepreneurial failure is an emerging field of research. Frequent areas of inquiry in this context comprise topics like stigma of failure, effects of failure, the recovery from and sense-making of this critical experience, learning from failure, and the impact of failure on re-entry into entrepreneurship (Ucbasaran et al., 2013). Dynamic models, which cover the entire process of failure, remain rare (Cope, 2011, Singh et al., 2007).
Method: This study utilizes a qualitative approach. We conducted semi-structured interviews with 18 entrepreneurs from knowledge-intensive sectors in Austria, who experienced business failure. Due to the complex and underresearched phenomenon, we opted for an inductive, phenomenological procedure and applied qualitative content analysis (Mayring, 2015). Using this method, we could depict the trajectory of entrepreneurial failure and get a better understanding of this stage of the entrepreneurship process.
Results: Business failure turned out to be an important life experience and a unique opportunity to learn for entrepreneurs. Study participants particularly learned in the fields of management of product development, hedging of start-up capital and strategic management. With respect to the latter, the entrepreneurs emphasized the importance of an exit strategy already at the time of founding of a new company. A better understanding of business issues, complementarily to technical knowledge about the product, previous work experience and a careful choice of business partners were perceived as important learnings in the context of technology-based entrepreneurship. In our study, five entrepreneurs experienced a regenerative failure, i.e. they launched a new business again. In addition, they all were already able to achieve growth in terms of company size.
Value: We hope to contribute to the entrepreneurship research on failure by providing a comprehensive picture of experiencing and learning from failure through investigating this phenomenon from the pre-failure stage until re-engagement. Through paying special attention to the contextualized learning outcomes, we gained an insight into how entrepreneurs in knowledge-based sectors come to, experience and recover from business failure. With this empirical study, we also responded to the recent call for more empirical studies which allow this emerging subfield of entrepreneurship to move forward.