What determines entepreneurial failure: taking advantage of the institutional context

Most management literature has been devoted to explaining business success. However, empirical evidence shows that one of the main problems of new ventures is precisely failure. A simple Google search for �business success� provides 986 million results, while �business failure� finds approximately ten times fewer. The same is found in the academic literature, which has been less interested in explaining the determinants of entrepreneurial failure. In this paper, we contribute to the entrepreneurship literature by offering new theoretical insights into and empirical evidence on the determinants of entrepreneurial failure. Our results confirm that both the quality of formal institutions and high-impact entrepreneurship reduce failure and, more importantly, that these two variables reinforce each other. As a consequence, a greater development of formal institutions strengthens the negative relationship between high-impact entrepreneurship and failure.