http://www.babson.edu/entrep/fer/papers99/I/I_B/I_B%20Text.htm WHEN THE GOING GETS TOUGH . . . TOWARD A PSYCHOLOGY OF ENTREPRENEURIAL FAILURE AND RE-MOTIVATION Melissa S. Cardon, Columbia School of Business Rita Gunther McGrath, Columbia School of Business ABSTRACT This paper extends a carefully developed perspective in the psychological literature to the phenomenon of entrepreneurial failure and motivation, with particular implications for entrepreneurial behavior during the post-startup period. We develop a new instrument to assess psychological predispositions concerning three key constructs: attribution of the cause of failure; reactions to failure, and goals for the achievement of personal acclaim or personal development. Results from a sample of pre-entrepreneurial individuals suggest that these constructs from psychology, appropriately translated, may offer a richer understanding of how individuals are likely to react to inevitable setbacks during the entrepreneurial process. This has potentially important implications for the discovery, training and preparation of entrepreneurs, as well as for how they should be managed and monitored during the post-startup period. INTRODUCTION "Failure isn't fatal unless you let it be."-Mike Ditka Starting a business, growing a business and being in on the beginnings of a new industry are by their very nature uncertain undertakings. That some individuals voluntarily choose to make themselves vulnerable to the risks of uncertainty in these situations has long fascinated entrepreneurship researchers, leading to a substantial literature on the topic of entrepreneurial motivation (for instance, McClelland's (1961) seminal work on need for achievement). In its focus on the motivation to start a business, however, this literature is relatively silent on two additional problems of equal importance to our understanding of the entrepreneurial process. First is the question of what happens to entrepreneurial motivation after the startup phase. This is a non-trivial problem, as most businesses require what MacMillan and Subba Narasimha (1987) describe as long-term, sustained, effort on the part of the entrepreneur. Second, there is relatively little discussion of de-motivation, or those factors that might lead a formerly motivated entrepreneur to become discouraged, disaffected or disgruntled. We have little theory or evidence to guide us as to what qualities lead a founder to persist in the development of a business, even after start-up hurdles have been overcome. Both these issues are crucially important if we are to understand the process through which entrepreneurs engage in "fostering new combinations that improve our economic life" (Bull & Willard, 1995: 5). Indeed, as Bull and Willard point out, the intensity of the motivation of the entrepreneur will inevitably affect the way in which the entrepreneur carries out discontinuity-causing actions. This suggests a fruitful intersection between the economic and psychological aspects of entrepreneurship. Of particular concern is how individuals respond to the inevitable setbacks and frustrations (and even outright flops) of the entrepreneurial process. Understanding the psychological aspects of entrepreneurial failure and motivation are thus our focus. We borrow extensively from psychological research, which suggests that how individuals attribute their experiences influences how they react and whether they persist (Weiner & Kukla, 1970). On one hand, failure can be attributed to innate ability. Failure signals that this ability is inadequate, creating a `helpless' reaction. This impairs performance, and often results in individuals seeking to end their involvement in future activities similar to the one that failed (Weiner & Kukla, 1970). An alternative attribution is to believe that failure is simply due to a lack of effort or planning, and that a similar situation could be mastered in the future with a renewed focus and drive. Such a `mastery' reaction usually involves the individual increasing their effort level and remaining optimistic even in the face of repeated failure experiences (Weiner & Kukla, 1970). Attribution theory might thus provide a useful means to understand why some entrepreneurs simply give up when facing setbacks, while others persist. The purpose of this study is to identify first, whether attribution theory might add value to our understanding of failure in the entrepreneurial process, and second whether the techniques used by psychologists on subjects in controlled, experimental environments might shed useful insight to the behavior of entrepreneurs. In the next section, we examine the first question, suggesting that attribution theory might better help us understand the entrepreneurial process. We then turn to the second question, and describe new scales developed for this study to measure constructs from psychological attribution theory and present results of our analysis of a sample of entrepreneurial aspirants from an elite business school in the United States. Implications for the further development of these ideas, and their applicability to a theory of entrepreneurship and entrepreneurial capital deployment are discussed.