Abstract
Background: At the dawn of the 21st century, Zimbabwe started moving towards dangerous levels of the infamous hyperinflation trajectory that made management of businesses a nightmare. Many businesses failed. Aim: This study seeks to explore if entrepreneurship, and in particular the aspects of risk-taking and tolerance of failure, could have saved the few companies that survived the menace that ravaged the insurance industries among many other sectors of the economy. Setting: The study looks at this particular entrepreneurial behaviour of risk-taking among insurance companies in Zimbabwe during the hyperinflationary environment that ravaged and defied economic logic and fundamentals. Savings were being eroded at a pace faster than anywhere in the world ever before, taking a toll on businesses as they struggled to survive. Methods: Using a survey sample of insurance companies in Zimbabwe, a quantitative approach was adopted. Questionnaires were used to extract data from participants to establish the nature and extent of risk-taking, and in particular tolerance for failure during this period. Therefore, tolerance of failure in corporate entities is discussed in this article as a critical aspect of risk-taking that enhances entrepreneurial innovation and ultimate prospects of corporate prosperity among insurance companies. A measure is developed to gauge the extent of tolerance of failure from the perspective of employees in the insurance industry in Zimbabwe. Results: The benefit of tolerance of failure or the lack thereof was measured on the dimension of profitability and growth. Results revealed that tolerance of failure is a necessary entrepreneurial virtue that encourages knowledge acquisition by both experimental and experiential learning – a risk element that also spurs entrepreneurial innovation and ultimately encourages both profitability and growth of the business entity, if well managed. Conclusion: The study concluded that firms that tolerate failure are more likely to be entrepreneurially innovative and perform better than those that are risk-averse and do not tolerate failure.
Highlights
To act entrepreneurially is neither a miracle nor is it merely necessitated by circumstances of deprivation or any conditions of living
Entrepreneurship is about successes and failures, bearing in mind that a small start-up will have to compete with established giants for quality products in the same marketplace
The variance can be explained by the fact that the Reserve Bank of Zimbabwe may have felt duty-bound to self-censor and obliged to publish conservative figures of inflation to allay simmering public discomfort at the http://www.sajesbm.co.za rate at which the economy was degenerating, whilst external institutions located far from reality could have obtained skewed data, but could have felt the need for more objectivity
Summary
To act entrepreneurially is neither a miracle nor is it merely necessitated by circumstances of deprivation or any conditions of living. The ability to tolerate failure would determine the extent to which a firm is prepared to take risks and enhance its entrepreneurial behaviour for better performance. Zimbabwe witnessed an incomparably dire socio-economic downturn, especially between 2003 and 2008 During this time, the record hyperinflation peaked at 231 million per cent (in July 2008) (RBZ Monetary Policy 2008), but the Cato Institute of Calculations and Forbes Asia put the figure at above 500 million per cent, year on year. The financial services sector, especially the insurance industry (which consisted of 83 companies), was severely affected These sectors, according to the Governor of the Reserve Bank of Zimbabwe, Dr Gideon Gono, are ‘driven by public confidence’ (November 2012). In the said Zimbabwean scenario, the question arose of whether some insurance companies’ ability to emerge out of the hyperinflationary environment to stabilise and align with the new growth trajectory was attributable to certain aspects of EO and, in particular, the extent to which they would take risks and the risk attributed to tolerating failure
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