Entrepreneurship Failure - Essay Example

Theoretical and Empirical Research Assessment of Entrepreneurship Failure Name Institution Theoretical and Empirical Research Assessment of Entrepreneurship Failure From any rational point of view, most people consider starting a business opportunity is a crazy idea owing to high failure rates, the high emotional toll, and possibility of having to work extremely hard for possibly little reward is incredibly high. However, every year, millions of people engage in entrepreneurial activities and succeed. The question that remains clear is why other businesses fail while other succeed. Entrepreneurship is not a single concept considering the numerous definitions it has. Currently, an entrepreneur is any person undertaking a commercial enterprise as some personal financial risk. In addition, continuous change is important, and there are expectations in the development of the technical, social, and economic areas (Frese, Rousseau, & Wiklund, 2014). However, this modern concept differs from that of the ancient and medieval world in which the philosophers failed to pay attention to the economic issues that influence the performance of entrepreneurship activities. Historically, it is evident that the conception of the entrepreneurship has evolved over time. The artisans, small scale traders, new technologies are all seen as entrepreneurs. One of the greatest mysteries involved in investing in the entrepreneurial activities is why most businesses fail. However, the worst thing about such failures of the business is that most entrepreneurs are unaware of its happening until the status of the business deteriorate to a level that it becomes difficult to salvage. The reasoning is logic considering the fact that if the entrepreneurs knew the factors initiating the poor performance, then they would be able to save their businesses. Moreover, some entrepreneurs live in denial lands while the others completely to not understand their mistake. There several reasons that always trigger the failure of many entrepreneurial activities. Most of them often fail to have plans of conducting their activities whether for long term or short-term basis. The business plan needs to entail the measurable objectives, results, and place in the next fears years of the operation. The right plans need to include specific go-to lists with defined dates and deadlines since failure to have the plan for the business is planning to damage the business. Besides, most of the investors fail to portray leadership qualities while running their businesses. Through leadership, the entrepreneurs can make the right decisions from time to time. From issues relating to financial management and management of the employees, failure to portray leadership qualities trickles down every aspect of the business. Therefore, entrepreneurs need to learn, study, and reach out to the mentors with an aim of improving their leadership skills. Having great products in the market is not enough to guarantee the success of the business. Most entrepreneurs have no differentiations for their products and activities (Murphy, Liao, & Welsch, 2006). New businesses in the market need to develop a unique proposition to allow them to compete effectively in any busy market. In every market structure, businesses are becoming very competitive especially with the changing needs of the customers. Most entrepreneurial activities often fail to account for these needs, which is the major, factor triggering the failures. In every business venture, customers are always the priority. However, few incoming entrepreneurs consider the customers in their operations. Any business that collapses loses touch with the potential clients; therefore, it is important to keep an eye on the trending needs and values of the potential clients. For success, business has to conduct market research on whether the clients still love their products, investigate whether they require new features, and their perception regarding their products. Other factors likely to trigger failure of new business ventures are the inabilities of the entrepreneurs to learn from their failures, poor management skills, and inadequate capital to fulfil some of the desired objectives. The survival of every business depends on its success in the market, yet rarely do venture businesses learn from their previous mistakes. Realistically, every business that fails for several reasons. The essences of managing businesses effectively depend on the ability of the entrepreneurs to listen to the needs of the customers and align business activities in line with the changing needs of the market. With the limited capital, the entrepreneurs are unable to interact effectively with the investors. Inadequate capital is an alarming issue among the investors reflecting the inability of the businesses to take care of their bills and financial commitment. In addition, inadequate capital could also deter businesses growth and jeopardize some of the business operations. Entrepreneurs also site their businesses in poor locations, less profit, and inadequate inventory management. Utilizing too much inventory might hurt the profitability of the businesses (Wyrwich, Stuetzer, & Sternberg, 2015). According to research conducted by the Small Business Trend, only 40% of new investments are profitable, 30% are break-even and 30% making losses in the market owing to poor business skills. While operating their activities, most upcoming entrepreneurs often fail to consider the microeconomic factors. The entrepreneurs have no control over these factors. Some of the common microeconomic factors influencing the operations of the entrepreneurs include business cycles, recessions, government debts, and inflation. With proper strategies, new venture can succeed like the Microsoft, HP, and Burger King, which started when there were several countries facing tough economy. More importantly to note, most entrepreneurs lack the succession plan for their businesses. Therefore, those planning to invest in business needs to identify their plan in advance before commencing the investment. Without an efficient and effective succession plan for the venture, it is a clear indication that the business is unprepared to handle the openings created through retirements of some employees. In the United States, small businesses constitute approximately 98% of all the businesses and employees more than 59 of the labour force. Globally, the small business sector is the fastest growing making more than 50% of the sales and products within the private sector signifying its importance within the economy. Most research indicates that some of the specific paths of success might not be suitable for some businesses (Shankar, 2015). There are features of the entrepreneurs, demographic aspects of their businesses, and strategic tools used in running these kinds of businesses. Failure can be devastating, costly, and painful both emotionally to the entrepreneur might have to face different stigmas and reputation loss. Failure might contribute to grief, shame, discouragement, and rejection of an entrepreneur especially with the tough economic times that every business is looking partners with successful records. The mismanagement of failure can contribute to stern emotional and financial costs. However, despite the challenges associated with managing entrepreneurial businesses, failures could also result in some learning opportunities for the entrepreneurs. For example, it might lead to the development and enhancement of the entrepreneurial skills, which are useful in developing the subsequent business opportunities. As a result, the learning process from the mistakes might motivate and enhance the decision-making skills. Through the years, the academic disclosures on matters relating to entrepreneurial failure have been able to draw attention on the failure as an important phenomenon. The past twenty years witnessed the explosion of various researches that investigate entrepreneurs and there activities with much consideration on establishing the factors that contribute to the successes of many business ventures (Wennberg & DeTienne, 2014). Nonetheless, some of the studies argue that there is need to give much attention to the entrepreneurial failures to understand effectively the subject of entrepreneurship, which requires an adoption of holistic approach. Failure is important in understanding the concept of entrepreneurship since it offers an opportunity of learning the new concepts in the market and significant steps towards developing the desired expertise. Moreover, studies on failures could as well help in the policy making process and venture funding to enable business institutions better understand the market, meet the requirements of the customers, and the ever changing demands of existing and potential entrepreneurs. These arguments sparked several interests especially in the past decades especially on matters regarding failure in entrepreneurship. These factors include psychological, leadership competency, financial, pedagogical, strategic management, and policy. Although the theoretical approaches to understanding the concept of failure in entrepreneurship are varied, research of the failure concept is recent. Various studies looked at the appropriateness of management, financial planning, and skill development of the entrepreneurs. Moreover, the studies also revealed the environmental features. High-quality services in the entrepreneurial activities are the key to success, which relates directly to effective management and planning. Success also depends on the effective decisions made by the management. There is no accepted list of distinguishing features of business success from the failures. However, the commonly stated factors that distinguish entrepreneurial success or failure include capital and management experiences (Frese, Rousseau, & Wiklund, 2014). Furthermore, some researchers report that the key success factors in the small business activities include experience of the entrepreneur, enough financial resources; competitive advantages, which focus on the customer and specialization of the product, and the strategic planning, meant to achieve the desired objectives. The experience of the management is important in achieving the desired successful performance within any small business environment. Although experience is an important factor, it might vary depending on the industry of importance. The recent studies are acknowledging that it would be so meaningful if the researchers begin investigating not only the causes of entrepreneurship failures but also the experience of failure and the effects that the failures have on the well-being, learning processes, and future decisions of entrepreneur. Furthermore, there is need to investigate the activities affected due to these failures. These matters are highly relevant and worth investing considering the central role-played by the entrepreneurs in creating the ventures. The experience of failure portrayed by the entrepreneurs might influence the future decisions made by people interested in investing in entrepreneurship. Generally, the previous researches on the failure widely describe the processes that the entrepreneurs undergo subsequently due to losses associated with business activities. However, the post-failure processes contribute to the acquisition of the potential learning by the entrepreneurs to avoid the mistakes that contributed to the unwanted outcomes (Walter & Block, 2015). In addition, skills of an entrepreneur, in turn, influences the learning process since it contributes to the ability of the investors to sense the failure and recover from the painful events caused by the losses. Nonetheless, the researchers failed to describe the relationship that occurs between sense making and recovery since both the processes stem from the occurrence of the business failure. In addition, these two factors also influence the outcome of the learning process of an entrepreneur. Arguably, these processes run in parallel to that of the entrepreneurial mind and they both have the effect on one another. Identified gap Much research has been carried out on the entrepreneurial failures. However, there is far less research on the failure than conducting the research focusing on the success. In addition, identification of these causes seem to be the dominant is the perspective of adopting studies, and empirical research on the experience the entrepreneurs have on businesses failures. This factor accounts for the major gap within the reviewed literature. Moreover, there is the need to know more about how the entrepreneurs the entrepreneurs remain resilient while experience failure in their businesses. With focus on ways that the entrepreneurs stay resilient while experiencing the failures, much emphasis needs to be from the individual context on the venture failure. Therefore, cases associated with resilience are under-researched within the concept of entrepreneurship failure, it is significant to draw broader organizational theory of literature to assist in clarifying the research gap. Few types of research also exist on the success or failure of the apparel entrepreneurs. Currently, many types of research are focusing on the factors that influence entrepreneurial success or failure. Globally, there are high business failure rates highlighting the important of shifting the focus on the entrepreneurial research. Therefore, it is significant to understand properly the entrepreneurial failure to understand what contributes to failure. Several factors might contribute to the collapse of the business. Nevertheless, there is little evidence from the reviewed literature on how these delicate issues interact with one another. The process of analysing the entrepreneurial failure might assist in filling the gap. The process rarely exists. References Frese, M., Rousseau, D. M., & Wiklund, J. (2014). The Emergence of Evidence-Based Entrepreneurship. Entrepreneurship Theory and Practice, 38(2), 209-216. Murphy, P. J., Liao, J., & Welsch, H. P. (2006). A conceptual history of entrepreneurial thought. Journal of Management History, 12(1), 12-35. Shankar, R. K. (2015). Book Review: Dean A. Shepherd (Ed.), Entrepreneurial Failure. Journal of Entrepreneurship, 24(2), 242-248. Walter, S. G., & Block, J. H. (2015). Outcomes of entrepreneurship education: An institutional perspective. Journal of Business Venturing, 18(4), 118-129. Wennberg, K., & DeTienne, D. R. (2014). What do we really mean when we talk about 'exit'? A critical review of research on entrepreneurial exit. International Small Business Journal, 32(1), 4-16. Wyrwich, M., Stuetzer, M., & Sternberg, R. (2015). Entrepreneurial role models, fear of failure, and institutional approval of entrepreneurship: a tale of two regions. Small Bus Economics, 15(7), 115-127. Read More