"The Rocky Road of Business Demise, Failure and Recovery"

Abstract

In contrast to grief and process models of business-related failure, which focus mostly on events post business failure, this multiple case study of 13 entrepreneurs with failed businesses identifies four distinct stages associated with business failure process, namely (i) the demise of the business, (ii) the decision to close the business, (iii) closing the business, and (iv) the entrepreneur’s recovery from business failure. Comparisons of changes across these stages of the business failure process reveal a number of new insights regarding negative emotions, problem-focused coping, and sensemaking. First, we find a rollercoaster of negative emotions. That is to say, negative emotions are high while the business is in demise but decrease when the entrepreneur decides to close the business; negative emotions then escalate as the decision to close is implemented and its consequences felt, and then subside as time passes after the failure event. Second, although problem- focused coping is used considerably during the demise of the business it is used little around the decision to close the business but regains prominence around the failure event. Third, sensemaking increases for some entrepreneurs after the decision to close the business but for others it increases over time after the closure of the business. We develop the idea of change across stages of the business failure process to capture some of the dynamics of emotions, coping, and sensemaking that are associated with business failure.