EMOTIONAL TRANSFORMATION OF FAILURE: PASSION, RESILIENCE AND ENTREPRENEURIAL SELF-EFFICACY

New entrepreneurs often face failures that can erode confidence and self-efficacy, thereby obstructing progress. This study considers the effects of failure on entrepreneurial self-efficacy and proposes a model based on entrepreneurial learning of how passion and resilience may mitigate these effects. Using data from 423 entrepreneurs (both successful and unsuccessful) in North America, it tests a model via structural equation modeling, in which entrepreneurial self-efficacy is directly affected by failure, and indirectly affected by passion and resilience. The results indicate the negative direct effects of failure on entrepreneurial self-efficacy may be offset by strongly positive effects of entrepreneurial passion and by resilience. This appears to be the first empirical study to test directly the moderating effects of entrepreneurial passion and resilience on the relationship between failure and entrepreneurial self-efficacy. In the presence of sufficient passion and resilience, failure may be viewed as a positive influence on self-efficacy. The results suggest that entrepreneurial failure may act as a precursor to entrepreneurial passion. They also suggest that the practical, negative effects of setbacks can be mitigated, or even reversed, by focusing on developing entrepreneurial passion and resilience in new entrepreneurs.