Individual responses to firm failure: Appraisals, grief, and the influence of prior failure experience

This paper provides a systematic assessment of how entrepreneurs react to firm failure. We use appraisal theory as an overarching theoretical framework and hypothesize that the more the failure experience is appraised as stressful in terms of its implications for harm or loss, the greater the feelings of grief. To test this hypothesis we developed a unique database of entrepreneurs who recently filed for firm bankruptcy. Our results support that there is great variation in responses to firm failure, and we provide theoretically valid explanations to why this is the case. These findings have substantial implications for how scholars conceive and theorize about entrepreneurial failure. ► We systematically investigate entrepreneurs’ felt grief after firm failure. ► Appraisals contribute to explaining variance in felt grief. ► Loss of self-esteem is a mechanism which transfers the failure of the firm to a personal failure for the entrepreneur. ► Resilience can help entrepreneurs rebound after entrepreneurial failure.