Abstract

This paper investigates why entrepreneurs experience stigma after firm failure and what can be done to reduce it. We use attribution theory as an overarching theoretical framework and hypothesize that entrepreneurs are held more accountable than employees for their unemployment after firm failure irrespective of the circumstances causing the failure. To test this hypothesis we conduct a between group, 2x2 full factorial experiment where the cause of the failure is manipulated. We find that entrepreneurs are held more accountable for firm failure irrespective of the circumstances causing the failure and that respondents who view failure as an inherent risk of firm ownership are less likely to stigmatize failed entrepreneurs.

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