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The stigma of failure: An international comparison of failure tolerance and second chancing

  • Brendan Burchell
  • Alan Hughes
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    It is commonly asserted that high rates of entrepreneurship and superior economic performance in the United States is linked to a higher cultural tolerance of business failure. After reviewing cross country patterns of entrepreneurship we develop in this paper a measure of cultural attitudes towards failure which has two components. We term these failure tolerance which captures attitudes towards the risk of a business failing and second chancing which measures the degree of agreement with the proposition that those who have failed should be given a second chance. Using a unique dataset on attitudes to failure for a sample of 9,500 individuals drawn from 19 economies for the year 2002 we show that respondents in the USA appear to have relatively high levels of failure tolerance. However, they are less willing to grant a second chance to those who have tried and failed. We find that having relatively high levels of failure tolerance is not positively correlated with GDP growth. Having a relatively positive attitude towards second chancing across countries is positively related to GDP growth. Taken together these results suggest there is a link between attitudes to failure and economic growth, but it is not the one conventionally assumed in current policy rhetoric which argues that relatively favourable attitudes towards second chancing in the USA explains its more entrepreneurial activity.

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    Paper provided by ESRC Centre for Business Research in its series ESRC Centre for Business Research - Working Papers with number wp334.

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    Date of creation: Dec 2006
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    Handle: RePEc:cbr:cbrwps:wp334
    Note: PRO-1
    Contact details of provider: Web page: http://www.cbr.cam.ac.uk/

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    1. John Armour & Douglas Cumming, 2005. "Bankruptcy Law and Entrepreneurship," ESRC Centre for Business Research - Working Papers wp300, ESRC Centre for Business Research.
    2. Michele Cincera & Olivia Galgau, 2005. "Impact of Market Entry and Exit on EU Productivity and Growth Performance," Industrial Organization 0503013, EconWPA.
    3. Bartelsman, Eric & Haltiwanger, John C. & Scarpetta, Stefano, 2004. "Microeconomic Evidence of Creative Destruction in Industrial and Developing Countries," IZA Discussion Papers 1374, Institute for the Study of Labor (IZA).
    4. Blanchflower, David G., 2000. "Self-employment in OECD countries," Labour Economics, Elsevier, vol. 7(5), pages 471-505, September.
    5. Giannetti, Mariassunta & Simonov, Andrei, 2003. "Does Prestige Matter More than Profits? Evidence from Entrepreneurial Choice," CEPR Discussion Papers 4157, C.E.P.R. Discussion Papers.
    6. Shane, Scott, 1993. "Cultural influences on national rates of innovation," Journal of Business Venturing, Elsevier, vol. 8(1), pages 59-73, January.
    7. André van Stel, 2003. "COMPENDIA 2000.2: a harmonized data set of business ownership rates in 23 OECD countries," Scales Research Reports H200302, EIM Business and Policy Research.
    8. Nicola Brandt, 2004. "Business Dynamics and Policies," OECD Economic Studies, OECD Publishing, vol. 2004(1), pages 9-36.
    9. David de Meza, 2002. "Overlending?," Economic Journal, Royal Economic Society, vol. 112(477), pages F17-F31, February.
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