According to Blanchflower et al. study, there are as many as 50% of a country’s population (73.3% for Portugal, for example) have the intention of starting a new business in the next three years. However, only few of them, less than 5% of population, really take actual steps toward entrepreneurship. It has been suggested that fear of failure is one of the main factors that may prevent many “potential” entrepreneurs to become “actual” entrepreneurs. What does entrepreneurship literature has to say about fear of failure and how entrepreneurs can conquer it?
Several prior studies have suggested that fear of failure has a negative influence on entrepreneurial entry. According to Caliendo et al. (2009), Since entrepreneurship is intimately related to uncertainty and risk taking, individual’s fear of failure is a potent factor inhibiting entrepreneurial entry. Fear of failure can indicate risk aversion so that individuals with higher levels of such fear may be more risk averse. The psychological literature would suggest that individual’s fear of failure is a self-evaluative framework that influences how he or she defines, orients to, and perceive failure in achievement situations especially those related to risk-taking behavior.
There is an important socio-cultural dimension to fear of failure. Parker, in his book economics of entrepreneurship, suggests that fear of failure is related to anticipated social stigma. In fact, there are countries like the US that do not stigmatize individuals who failed as an entrepreneurs and even encourage failed entrepreneurs to start again. On the other hand, several European countries, like Germany for instance, has the culture such that failed entrepreneurs would be stigmatized by friends and society more like “losers”. So it would be difficult for them to start a new venture again (think of approaching venture capitalists in this society) or, basically, any other significant economic activities if someone fails. Interestingly, Wennberg et al. have recently found that In societies characterized by a low level of institutional collectivism, fear of failure will be a more potent inhibitor of entrepreneurial entry. This can be mainly attributed to the social protection and support you may receive from others in case of failure.
An important aspect to conquer the fear of failure is to keep a positive attitude toward failure. It is important to remember that failure is part of life and, in fact, there is no courage without fear. Real entrepreneurs embrace such fear and know that failure is only there to teach them some important business (and life) lessons.
Another point is that such moments of fear and doubt mainly exist before you start as an entrepreneur; once you start and are deeply involved in your new venture, such moments of doubts vanishes due to your focus.
Another important insight is from behavioral economists. Behavioral economics suggests that our brain normally cannot comprehend very low percentages (like 0.0001%) and automatically assign a higher percentage to such low values (like 2% or about 2000 times more!). So if the likelihood of an accident or a plane crash is something like 0.00001%, your brain does not comprehend how little this number is. By the way, that’s how insurance companies make loads of money. The point is that next time you think about your failure odds, do not fast forward to the apocalypse and think how we over-estimate the failure likelihood and its impact.
Lastly, many societies should not stigmatize failure as strong as they do at the moment. While serial entrepreneurs with failed businesses are everywhere, American society, for instance, encourage people not to be afraid of taking the new venture challenge and pursue their dream. I agree that the process of de-stigmatizing failure is gradual at the collective level and may takes decades if not centuries. Nevertheless, media could help societies by introducing successful entrepreneurs who had failed before.