A Second Chance for Failed Entrepreneurs: A Good Idea?

In this paper, we analyze how previously failed entrepreneurs fare with their current venture in terms of survival compared to novices. While previous literature focusses on superior learning effects from failure experience, we point to the selection process that takes place before we see failed entrepreneurs as business owners again. One potential driver of this process is entrepreneurial talent. We find that failed entrepreneurs are less likely to survive with their current venture. This result persists for several subgroups of entrepreneurs, if we consider the number of past failure events and if we control for the inclination of entrepreneurs to pursue high-risk projects. Overall, the results in this paper are consistent with the hypothesis that previously failed entrepreneurs are those with below-average entrepreneurial talent.

Gottschalk, Sandra and Bettina Müller (2022), A Second Chance for Failed Entrepreneurs: A Good Idea?, Small Business Economics