Differing perceptions of new venture failure: A matched exploratory study of venture capitalists and entrepreneurs

Using an attribution theory viewpoint, this study examines new venture failure from the perspectives of both the entrepreneur and the venture capitalist. Contrary to what should be expected, given attribution theory, entrepreneurs acknowledge that internal causes contributed to their venture's failure. On the other hand, VC's attributed the failure to external causes, differing from the entrepreneur's perception of the event. Both the entrepreneur and VC were more likely to attribute the failure of other ventures to internal factors (the fundamental attribution error). This study suggests that entrepreneurs and VCs view failure differently. These differences might cause misapplication of scarce entrepreneurial resources.