University of Oulu

Why an entrepreneur needs three failures before success : entrepreneurial learning after failure

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Author: Haapala, Sami1
Organizations: 1University of Oulu, Oulu Business School, Department of Management and International Business, Management
Format: ebook
Version: published version
Access: open
Online Access: PDF Full Text (PDF, 0.8 MB)
Persistent link: http://urn.fi/URN:NBN:fi:oulu-201605121714
Language: English
Published: Oulu : S. Haapala, 2016
Publish Date: 2016-05-13
Physical Description: 76 p.
Thesis type: Master's thesis
Tutor: Puhakka, Vesa
Reviewer: Puhakka, Vesa
Sipola, Sakari
Description:

Abstract

This thesis aims to give an understanding of what is behind a failure in a startup industry. To understand why failures are needed for a success, the serial entrepreneur process has to be clarified at an individual level. In the failure process, under analysis are the main phases of turning a failure into a success and the outcomes which should be used as the next venture foundations. This study also aims to give basic tools for entrepreneurships on how to proceed after a failure at a personal level so that the entrepreneurs would be able start a new venture having a positive experience from the last failure.

The study begins with a literature review in which concepts of entrepreneurial learning and theoretical failure process model are presented. This created model is then tested in the empirical part. The method used in this study is done as an abductive approach using exploratory research design with a cross-sectional study method to collect and analyze qualitative data. The data in the empirical part has been collected with face-to-face and telephone interviews with professional serial entrepreneurs.

The theoretical failure process model created in the literature review part was successfully tested in the empirical part. This process model could be used as the first step in any failure analyses as a tool for an entrepreneur or a manager. Going forward is much easier after analyzing the true reasons behind a failure. Finding root causes for a failure has provided learnings which are key tools for the future.

The scientific results of this study show that every entrepreneur that was interviewed has had multiple setbacks as failures during their career. However, they have managed to separate their professional and private lives so that if and when a failure has happened, financial, social and physical costs have been less significant. When these negative costs have been minimal ones, the entrepreneurs have had no or only minor grief before being able to analyze true reasons behind a failure and gaining learnings for the next venture. Learning from past failures, they have been able to avoid similar mistakes happening again. Furthermore, low grief has allowed for the recovery time from failures to reduce significantly.

The main managerial finding was that internal motivation is one of the root causes behind the entrepreneur having strength and motivation to continue despite failures. The internal motivation for their actions follows every step from starting a venture to failure analyses, all the way to learning and continuing to the next venture. In some cases, when that motivation was lost, even partly, entrepreneurs were noted to exit from that venture.

The purpose of this study was to give understanding of why a failure should be accepted as a natural and sometimes needed, but not wanted, step for learning in a long perspective. The purpose was not to give detailed tools for every reasons behind failure, but this work will rather provide basic tools on how to proceed if a failure happens. If the failure acceptance was wider, the outcome would be beneficial on three different levels. To understand the reasons behind needing failures for success, we need to focus on the entrepreneur’s failure process at an individual level. After understanding that, the process can be scaled up to company and further to community levels.

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Copyright information: © Sami Haapala, 2016. This publication is copyrighted. You may download, display and print it for your own personal use. Commercial use is prohibited.