How Entrepreneurs’ Failure Experience Impacts Their New Business Performance: Evidence From Rural China

Currently,the continuously increasing income levels and diverse consumuption demand of both urban and rural residents in China have created a large number of entrepreneurial opportunities for rural areas.Meanwhile,with the advancement of the rural revitalization strategy and the transformation and upgrading of the economic structure,both central and local governments have continuously increased their policy support for rural entrepreneurship,which has obviously optimized the entrepreneurial environment in rural areas.Therefore,an increasing number of farmers engaged in entrepreneurial activities and started their business in rural area,which makes them become an important force in the realization of agricultural modernization,urbanization and rural revitalization strategies.However,entrepreneurial activities are full of high risk and uncertainty,besides of that,the inherent limitations and external constraints of rural entrepreneurs aggravates their entrepreneurial risks.As a result,entrepreneurial failures occur more frequent in rural area.Although it is said that “The error of the past is the wisdom of the future”,many rural entrepreneurs who failed previously in their businesses do not success in the next round.Entrepreneurs’ failure experience and behavioral response after failure have a critical impact on their new venture performance.However,a small number of existing studies have only focused on urban areas,how rural entrepreneurs’ failure experience impact their new business performance has not been given attention within the entrepreneurship literature.Rural entrepreneurship is not a simple extension of urban entrepreneurship.The lack of research on entrepreneurship failure in rural settings has brought great challenges to rural entrepreneurs’ venturing activities and the formulation of relevant policy in rural areas.Against this background,the purpose of this research is to answer the following three questions:(1)Why do rural entrepreneurs fail?(2)Does rural entrepreneurs’ failure experience impact their new business performance?(3)How does rural entrepreneurs’ failure experience impact their new business performance? Focusing on the above three research questions,this article theoretically and empirically analyzes the direct and indirect effects of entrepreneurial failure on rural entrepreneurs’ new business performance based on the analysis of the factors that causing rural entrepreneurs’ previous failures,and proposes specific policies and suggestions based on conclusions of empirical study.The main content of this article is summarized as follows.The first part is the theoretical analysis of the impact of rural entrepreneurs’ failure on their new performance,corresponding to Chapter 2 of this article.Specifically,based on the famous entrepreneurial process model,Chapter 2 draws on the theory of learning from entrepreneurial failure,theory of identification of entrepreneurial opportunity,and theory of entrepreneurial bricolage,which stands for three core elements of entrepreneurial process respectively,constructs a theoretical analysis framework for the direct and indirect effects of entrepreneurial failure on rural entrepreneurs’ new performance.The second part analyzes the main characteristics of rural entrepreneurs who failed to start a business,and the internal and external factors that lead to rural entrepreneurs’ previous failure,corresponding to the main content of Chapter 3.In specific,using on dataset collected from 235 rural entrepreneurs who failed previously in the four provinces of Zhejiang,Anhui,Henan and Shaanxi,the discrete choice model and descriptive statistics analysis are used to analyze the main internal and external factors of their past failure on the basis of describing the typical characteristics of failed rural entrepreneurs.The third part is the Chapter 4 of this article,which explores the direct impact of entrepreneurial failure on rural entrepreneurs’ new performance.In specific,a research hypothesis that states the degree of entrepreneurial failure and its dimensions of financial loss,social loss and psychological loss have an inverted U-shaped relationship with rural entrepreneurs’ new business performance is proposed through theoretical analysis.Based on the research hypothesis,a dataset of 235 failed rural entrepreneurs is empirically tested using hierarchical linear regression model.The main content of the fourth part is the indirect impact of entrepreneurial failure on rural entrepreneurs’ new performance,including Chapter 5 to Chapter 7 of this article.Particularly,using 235 samples of data,and combines with hierarchical linear regression analysis and Bootstrap test method,Chapter 5 constructs a moderated mediation theoretical framework to verify the mediation effect of learning from entrepreneurial failure on rural entrepreneurs’ entrepreneurial failure and their new performance,and the moderation role of failure attribution;Chapter 6 verifies the mediation effect of opportunity identification between entrepreneurial failure and rural entrepreneurs’ new performance,and the moderation role of trust;and Chapter 7 tests the mediation role of entrepreneurial bricolage between entrepreneurial failure and new performance of rural entrepreneurs and the moderation role of social support.The fifth part corresponds to Chapter 8,focusing on the policy references and practical implication based on research conclusions.The main conclusions of this research include the following four aspects.First,from the dual perspectives of objective characteristics and subjective cognition,the internal and external factors that lead to the failure of rural entrepreneurs are analyzed,and the following research conclusions are drawn.:(1)The probability of male rural entrepreneurs re-starting after failure is significantly higher than that of female rural entrepreneurs;low level of education,entrepreneurs without skills,off-farm work experience,and the degree of risk appetite are significantly positively correlated with the probability of entrepreneurial failure.(2)Rural entrepreneurs attribute the primary reason for their entrepreneurial failure to internal and external causes account for about half of the proportions.(3)Rural entrepreneurs believe that the three primary reasons leading to their entrepreneurial failure include insufficient entrepreneurial experience and skills,market factors,and lack of effective information.Second,the relationship between the degree of entrepreneurial failure characterized by financial failure,social failure,and psychological failure and rural entrepreneurs’ new performance displayed as an inverted U shape,which confirms the “threshold effect” of the degree of rural entrepreneurs’ entrepreneurial failure on their new performance.Among them,there is a linear relationship between the financial failure and the new performance,that is,the impact of financial failure on rural entrepreneurs’ new performance is always positive;while the social and psychological failure are both show an inverted-U shape to the new performance,which implies,at a moderate level,both social failure and psychological failure have a positive impact on rural entrepreneurs’ new performance,however,once the social failure and psychological failure exceed a certain threshold,its impact on the new performance becomes negative.In addition,the threshold of the effect of entrepreneurial failure on rural entrepreneurs’ new performance calculated by our dataset is 3.92(the maximum value is 5),that means when the degree of failure is 3.92,the effect of entrepreneurial failure on rural entrepreneurs’ new performance reaches a maximum value.Third,by verifying the mediation effect of learning from failure between entrepreneurial failure and new performance,and the moderation effect of failure attribution,the following research conclusions are drawn.(1)Learning from failure plays a positive mediating effect in the relationship between entrepreneurial failure and rural entrepreneurs’ new performance,and the main driving force of learning from failure comes from the financial failure.(2)Failure attribution plays a significant moderation effect in the impact of entrepreneurial failure on learning from failure.Specifically,when entrepreneurs internally attribute failure,the degree of entrepreneurial failure has a significant positive impact on learning from failure,but when entrepreneurs attribute failure in external factors,the effect of entrepreneurial failure on learning from failure does not statistically significant.(3)The moderated mediation effect is significant,that is,internal failure attribution positively moderates the mediating effect of learning from failure between entrepreneurial failure and the new performance.Fourth,by illustrating the mediation effect of opportunity identification and the moderation effect of trust,the following conclusions are drawn.(1)Opportunity identification plays a positive mediation effect between entrepreneurial failure and the new performance.(2)Trust positively moderates the positive impact of entrepreneurial failure on opportunity identification.In other words,high level of trust will significantly strengthen the positive effect of entrepreneurial failure on opportunity identification,while low level of trust will weaken the positive effect of entrepreneurial failure on opportunity identification.(3)Trust positively moderates the positive impact of opportunity recognition on the new performance,that is,high level of trust makes opportunity recognition has a beneficial effect on the new performance,while low level of trust will weaken the positive impact of opportunity recognition on the new performance.Fifth,by verifying the mediation effect of entrepreneurial bricolage and the moderating effect of social support,the following conclusions are drawn.(1)Entrepreneurial bricolage plays a positive mediating effect between entrepreneurial failure and the new performance of rural entrepreneurs.(2)Social support positively moderates the positive impact of entrepreneurial failure on entrepreneurial bricolage,that is,strong social support can significantly enhance the positive effect of entrepreneurial failure on rural entrepreneurs’ entrepreneurial bricolage,while weak social support will weaken the positive effect of entrepreneurial failure on entrepreneurial bricolage.(3)The moderated mediation effect is significant as well.In other words,social support significantly moderates the mediation effect of entrepreneurial bricolage between entrepreneurial failure and the new performance of rural entrepreneurs.