Business failure and its effect on entrepreneurial engagement has attracted substantial scholarly attention in entrepreneurship research. We contend that knowledge is lacking on the entrepreneurial learning mechanism and entrepreneurial alertness condition under which business failure experience influences new venture performance. In an empirical examination of 240 entrepreneurs operating in multiple industries in a sub-Saharan African country, we use a longitudinal data set to show that business failure experience does not always influence new venture performance. Rather, business failure experience influences new venture performance when it is channelled through entrepreneurial learning under conditions of increasing levels of entrepreneurial learning and a greater degree of alertness to new business opportunities. We discuss these findings and provide avenues for extending this emerging area of scholarly research.

Introduction

Business failure experience and its consequences have attracted substantial scholarly attention (e.g., Cope, 2011; Ucbasaran, Westhead, Wright, & Flores, 2010). A contention is that the aftermath of business failure entails a feeling of loss and a process of recovery for entrepreneurs (Amankwah-Amoah, Boso, & Antwi-Agyei, 2016; Jenkins, Wiklund, & Brundin, 2014). Research suggests that business failure experience generates financial, social and psychological losses to entrepreneurs (Ucbasaran, Shepherd, Lockett, & Lyon, 2013). Despite the losses, scholars have argued that the loss phase is often followed by a period of sense-making and learning from the failure, and subsequently an entrepreneurial re-emergence (Shepherd & Cardon, 2009; Ucbasaran et al., 2013). Thus, it is argued that an ability to learn from failure may be a process through which entrepreneurs re-engage in new entrepreneurial actions (Cope, 2011; Shepherd & Cardon, 2009; Shepherd, Patzelt, & Wolfe, 2011).