The fourth and fifth rows provide the results for the second, fully specified estimation.
The financial loss indicators capture effects which were associated in the first specifica-
tion with closure reasons. Contrary to the results of the first specification, the findings of
the second specification show that DEBTS now does not significantly affect the likelihood
of restart. Closures indicative of failure thus have no influence on whether or not entre-
preneurs restart - a surprising finding, indicating that entrepreneurs are neither discour-
aged when their business fails, nor do they come to the conclusion they are unfit for self-
employment. However, this is in line with findings of Stokes and Blackburn (2002), who
report that entrepreneurs believe they can certainly succeed with another business even
after having failed. Such a view may not be rational, but is the result of psychological
defence mechanisms by which individuals blame external circumstances - such as an
unfavourable economic climate - for their failure rather than their own incapacities (see
Van den Steen, 2004 for a compilation of relevant citations).
The financial loss indicators also reveal some interesting effects. Surprisingly, the vari-
able SHAREHOL was not significant. This contradicts expectations: if shareholders, i.e.,
the entrepreneurs, suffer financial losses due to business closure, this plays no role in the
likelihood of restart. This finding could mean that entrepreneurs are often able to rescue
a large portion of their private capital after being forced to close their business. However,
it could also mean that entrepreneurs who restart are simply able to acquire the capital
they need, regardless of the depletion of their private resources.
By contrast, results for the BANKS variable conform with expectations. The effect is
negatively significant meaning that financial losses due to business closure considerably
lower the likelihood of restart.
Implications
The results of this study have some important implications for both policymakers and
entrepreneurs. Actually, the political position concerning failed entrepreneurs is that one
should “promote the fresh start of previously failed businesses, by enabling and empow-
ering them to begin new activities without being hindered by restrictions [because they]
do learn from their mistakes and are more successful in the future” (European Commis-
sion, 2002, p. 9). In the recent years several multivariate empirical studies refute this
outperformance myth (Kay et al., 2004, Metzger, 2006, Metzger, 2007b, Ucbasaran et
al., 2006), which was started or at least revived by a study of BCG (Boston Consulting
Group, 2002). In consequence these studies query the claim for special support. The
findings herein show, however, that solely the fact of business failure does not deter en-
trepreneurs from restart. Even if the failure results in private financial losses entrepre-
neurs’ restart likelihood remains unaffected. This is different to the occurrence of finan-
cial losses at banks or public institutions. Such kind of losses reduces restart likelihood.
Many of persons might argue now, that this is the proof for the need of special support
particularly since one knows that previously failed entrepreneurs are more likely to have
financing difficulties (Metzger, 2007a). However, it must be clear that any person having
debts at banks typically will have problems to get money independent if she is a previ-
ously failed entrepreneur or not. For example, novice entrepreneurs who are burdened
with old debts are likely to have financing difficulties, too. Doubts in the claim for particu-