Personal Experience: A Most Vicious and Limited Circle!?
higher-order learning should be initialized by “intelligent failures” which “have
large enough outcomes to attract attention, and small enough outcomes to avoid
negative responses” (Politis 2005, p. 411), it is frequently triggered by stressful
business failures. In such cases learning might be painful and traumatic and as-
sociated with psychological blows that question the entrepreneur’s perceptions
of himself or herself (see Cope 2005 or Ucbasaran et al. 2006 for a compilation
of relevant citations). However, if failure causes entrepreneurs to reflect on what
happened, it contributes to avoiding reoccurrence. This might explain why many
successful entrepreneurs regard failure as a crucial aspect of their experience
(Politis 2005). Owing to this, business failure experience should improve the
ability to avoid distress in future.
There is also a selection mechanism which should actually “breed” a positive
selection out of all renascent entrepreneurs. Many entrepreneurs are not yet able
to cope with the tasks of establishing a business and therefore relinquish their
plans in the pre-start-up phase. This selection mechanism is stronger in the case
of previously failed entrepreneurs. Some of them learn through the business fail-
ure that they are not entrepreneurially minded and drop out of entrepreneurship
(Jovanovic 1982). Furthermore, they need to get over their grief about the loss of
the business (Sheperd 2003) and have to convince their principals that the ven-
ture project is promising and well thought out - despite their previous failure.
Novice or previously successful entrepreneurs are not faced with such hardships
if they want to (re-)establish. Thus, of all entrepreneurs who have experienced
business failure and are making serious attempts to venture again, only a deter-
mined elite will withstand the pre-start-up phase.
The theoretical arguments suggest very clearly that the effect of entrepreneu-
rial experience on firm success should be positive. Yet the empirical findings are
ambiguous. There are opposing findings across the whole range of success
measures: with regard to firm profits Brüderl et al. (1996) found negative experi-
ence effects, while the results of Bosma et al. (2000) are inconsistent with their
claim that experienced entrepreneurs make higher profits. Referring to the em-
ployment stock Metzger (2006) found higher growth as a result of experience
while Kay et al. (2004) or Brüderl et al. (1996) deny such an effect. With regard
to firm survival the findings are similarly ambiguous: Taylor (1999) or Headd
(2001) show that experience heightens the probability of survival while others
contradict any relationship between entrepreneurial experience and firm survival
(Brüderl et al. 1992; Van Praag 2003).
With regard to the business success of previously failed entrepreneurs, the
empirical evidence is more scarce but just as ambiguous: results of descriptive
comparisons suggest positive impacts of failure experience on firms’ employ-
ment and turnover growth (BCG 2002). Using multinomial analyses on survey
data Kay et al. (2004) find no significant impact on employment growth, while