Dr. Espinoza-Benavides, Jorge

Despite the extensive literature on the relationship between entrepreneurship and institutions, there is limited knowledge of the relationship between institutions and engagement after failure. This study compares the entrepreneurial engagement of entrepreneurs who have recently experienced failure and individuals without entrepreneurial experience, emphasizing the interaction of government policies and programmes (formal institutions) and individualistic/collectivist cultures (informal institutions) with business failure and its impact on entrepreneurial engagement. We test our hypotheses using multilevel analysis on a large cross-sectional sample that combines individual level data from the Global Entrepreneurship Monitor (GEM) database with country level data from 49 economies. We provide evidence of selection bias for the entrepreneurial engagement of entrepreneurs after failures and of the role of culture as a significant aspect of re-entry into entrepreneurship. Therefore, our evidence helps reinforce the view that postfailure entrepreneurs are a special group of entrepreneurs and validates the contribution of institutional economic theory in explaining this phenomenon, especially the key role of informal institutions.

Previous studies have found a close relationship between exit/failure decisions and entrepreneurial/organisational characteristics. In the same line, entrepreneurship literature has recognised that the context matters in any entrepreneurial process, including “exit,” “failure” or “re-entry.” This manuscript proposes a conceptual framework to identify the elements of the entrepreneurial ecosystem that foster or impede the re-entry into entrepreneurship after a business failure. By reviewing the accumulation of knowledge, we identified the individual, the organisational, and the contextual conditions that influence the trajectory of an individual who decides to re-enter after a business failure. This manuscript provides a better understanding of the critical role of agents involved in the entrepreneurial ecosystem. A provocative discussion and implications emerge for this study in order to reduce individual barriers and unfavourable social norms towards business failure.