Entrepreneurial Cognition

by Dean A Shepherd

  Second, eliminating negative emotions from project failure may also weaken individuals’ commitment to subsequent initiation and advancement of new projects. In other words, because grief is a reaction to the loss of something that is important for individuals’ psychological and emotional well-being, eliminating negative emotions entails reducing the project’s emotional importance for him or her. In turn, this diminished importance enhances the probability of project failure. Decreased creativity (Amabile 1997; Amabile and Fisher 2000) as well as reduced commitment of the leaders (Song and Parry 1997) and employees (Amabile and Fisher 2000) of the project and team members can all lead to lower performance of the entrepreneurial project.

  To illustrate these ideas consider a physician with seriously ill patients, which are roughly analogous to an organizational member and his or her entrepreneurial project. If the physician becomes desensitized to patients’ death, he or she will engage in depersonalization. When depersonalization occurs, the physician’s interpersonal interaction with patients and their families gets less sensitive, more negative, and perhaps highly detached, ultimately resulting in patient care that is less effective (Peeters and Le Blanc 2001). Similar to physicians who have faced a considerable number of deaths, employees who have gone through numerous failures can eventually become desensitized to the project’s failure and may commit less to subsequent projects.

  In the next section, we propose an approach that regulates—instead of normalizing— grief triggered by project failure. We then describe the organizational conditions that will likely lead to superior learning and commitment outcomes using this approach.

  Coping Orientations and Project Failure

  Two approaches exist that researchers believe aid individuals in coping with the emotions caused by loss, and a third approach combining the two: a loss orientation , a restoration orientation , and an orientation of oscillating between loss and restoration orientation (Shepherd 2003; Stroebe and Schut 2001).2 We now address how each of these orientations impacts learning from project failure as well as their influence on the way employees utilize the time since their last entrepreneurial project has failed to deal with the negative emotions caused by the failure.

  When individuals engage in a loss orientation , they work through and process elements of a loss to break the emotional bonds they have to the object lost (Stroebe and Schut 2001). For this coping orientation, people must concentrate on what happened prior to the failure in order to form a plausible account for the failure event. Thinking about the process and causes of an entrepreneurial project failure can offer opportunities for constructive learning (Corbett et al. 2007; McGrath 1999; Sitkin 1992) if employees compare project performance when failure occurred to expected performance in the initial plans. Negative emotional reactions to the failure indicate how important the lost project has been, which focuses their attention on looking for and evaluating any failure-related information (Clore 1992; Ellis and Chase 1971; Schwarz and Clore 1988). These activities of scanning and comparing provide employees information about the failure and its preceding events. The individuals can then use this information to update their beliefs about the reasons underlying project failures and what can be done to counteract these causes in subsequent projects. Additionally, exploring why the entrepreneurial project did not end as planned can motivate individuals to consider different activities and strategies that could have been initiated (Kim and Miner 2007). Lastly, employees who detect project routines/processes that led to failure and must be altered for following projects may recognize a universal need for more flexibility and change. These individuals may then develop new plans to change routines, strategies, procedures, or actions as needed in subsequent projects (Eisenhardt and Martin 2000).

  When employees focus on the loss and develop an account for the failure event, the loss begins to take on new meaning, and the organizational members can finally start resolving their emotional attachment to the entrepreneurial project that has failed. This new plausible failure account triggers an adaptation of how the individuals view themselves and the context in which they act (Archer and Freeman 1999), thus enabling them to control their emotions in a way that stops the failure from causing negative emotions (Gross 1998). Employees with a substantial loss orientation begin grief work right away and start forming a more complete understanding of the project failure. For instance, in our study with a colleague (Shepherd et al. 2011), an aerospace engineering scientist recounted the following: “[After a failure,] I look back. … It is certainly necessary to make a rational analysis.” Yet, working through the loss is draining. After time, individuals begin thinking less about the events preceding the failure and more about the specific event itself and the resulting emotions, which may ultimately cause additional negative emotions (Bonanno 2004). For example, the engineer went on: “I then start asking myself too often ‘was this right’ and so on … and I then bedevil myself at points where no concrete conclusion can be drawn … [and then] only entropy [disorder within the system] is produced.” As this example shows, having a strong loss orientation for a long time can result in ruminations; ruminations can lead to a vicious cycle of negative thoughts, emotions, and actions (Nolen-Hoeksema 1991). Moreover, when working through grief entails counterfactual thinking, the individual may have feelings of disappointment, regret, and/or anxiety due to missing opportunities for avoiding the failure overall (cf. Baron 2000, 2004; Roese 1997). Rumination-induced emotions can worsen feelings of loss. Thus, although negative emotions are decreased early on, a loss orientation appears to ultimately lead to even more negative emotions after entrepreneurial project failure.

  Next, when individuals engage a restoration orientation , they suppress feelings of loss and proactively attend to loss-related secondary sources of stress (Stroebe and Schut 2001). As the definition implies, a restoration orientation has two dimensions—avoidance (of the primary stressor, i.e., the failed project) and proactiveness (toward failure-related secondary stressors). None of these dimensions helps individuals learn from project failure, but both help them to “keep a lid on” and/or decrease negative emotions . Avoidance entails distracting oneself to direct attention away from the failed project and the preceding events. For instance, employees may concentrate on dealing with alternative stressors, such as “What is my organizational role now that my project has failed?” and “How can I effectively work with my new project team ?” Although dealing with secondary stressors provides employees distraction from the entrepreneurial project failure event and allows them to continue with the their jobs, it offers few learning opportunities as it does not contribute to a more plausible explanation regarding the failure and therefore does not provide insight into the changes and adaptations needed for the next project.

  Thus, the likelihood of an association between restoration orientation strength and learning from the failure of an entrepreneurial project is low. However, with a stronger restoration orientation , individuals’ negative emotional responses to losing something important are likely to diminish (see Shepherd et al. 2011). That is, by actively avoiding thoughts related to the failure, employees do not consciously acknowledge the failure, and as a result no negative emotional response is triggered (or the response is minimized). Indeed, an individual’s focus on non-project-related tasks replaces his or her thoughts and emotions about the failure with other thoughts and emotions. These alternative thoughts, for instance, can include other achievements at work that trigger positive emotions. Moreover, proactively dealing with secondary stressors likely means that when those sources of stress are removed (or reduced), the original loss is no longer as troubling and thus does not cause a significantly strong negative response. Attending to secondary stressors may even generate positive emotions (Ganster 2005). These positive emotions , in turn, can help “undo” the negative emotions (Fredrickson 2001) caused by an entrepreneurial project failure.

  Yet, suppressing emotions is usually very draining (Archer and Freeman 1999).
As a consequence, suppression may lead to negative psychological (Prigerson et al. 1997) and physical (Gross 1998) issues. In addition, it is often challenging to repress emotions for a longer time period; the negative emotions are likely to come up eventually (Holahan and Moos 1987; Repetti 1992). As a result, more distress and future problems will emerge (Menaghan 1982), which worsen the failure experience overall. Therefore, as with a loss orientation , for a short time after an entrepreneurial project failure, with an increasing restoration orientation , individuals can lessen negative emotions . However, if this orientation persists for a longer time, negative emotions arise, which offsets the benefits of engaging a restoration orientation .

  Finally, when individuals engage an oscillation orientation , they move back and forth between a loss orientation and a restoration orientation (Shepherd 2003; Shepherd et al. 2011; Stroebe and Schut 2001), thus enabling them to realize the advantages of both orientations while reducing the problems associated with engaging in one orientation for too long. Initially experiencing negative emotions from failure activates the autonomous nervous system, focusing a person’s attention on what caused the failure (Fineman 1996; Hirshleifer 1993; Weick 1990). Working through the grief they experience , individuals may start ruminating about the failure of their entrepreneurial project and trigger additional negative emotions . These mounting negative emotions may eventually narrow their attention (Derryberry and Tucker 1994; Staw et al. 1981) and hinder the processing of available information (Lyubomirsky and Nolen-Hoeksema 1995; Weick 1990). In other words, the increasing negative emotions caused by a loss orientation that persists for too long can narrow people’s attention , diminish their information-processing abilities, and lessen their feelings of control (Carver et al. 1989; Lyubomirsky and Nolen-Hoeksema 1995), all of which are detrimental to effective learning .

  Changing to a restoration orientation after a loss orientation can help stop rumination by refocusing a person’s attention on activities other than the failure event, including dealing with secondary stressors. After individuals have successfully reduced their negative emotions and increased their capacity to process information (Fredrickson 2001), people with a strong oscillation orientation can revert back into a loss orientation to further understand the failure event. Thus, with a stronger loss orientation , employees are likely to learn more from entrepreneurial project failures as a result of this intensive evaluation of the failure event interwoven with periods of healing and concentrating on addressing secondary stressors. On the other hand, employees with a weaker oscillation orientation are likely to remain in either orientation for too long. If this occurs, the individuals will either become cognitively overwhelmed from thinking about his or her negative emotions (loss orientation ) or be unable to adequately form a believable explanation for the failure event (restoration orientation ).

  Additionally, an oscillation orientation may also improve a person’s ability to decrease negative emotions caused by the project failure by harnessing the advantages of both orientations for handling those negative emotions , thus decreasing the cost of staying in either orientation for too long. When a loss orientation helps a person form a more plausible explanation for an entrepreneurial project failure, it may give meaning to the loss and thus reduce negative feelings (Archer and Freeman 1999). As discussed earlier, engaging a loss orientation for too long can activate multiple and diverse negative emotions , leading the individual to recall negative thoughts about him- or herself and their environment (Lyubomirsky and Nolen-Hoeksema 1995; Nolen-Hoeksema 1991). These negative thoughts can in turn initiate a harmful spiral in which negative emotions escalate. When reflecting on the failure event starts to cause negative emotions, employees with a strong oscillation orientation start engaging a restoration orientation , taking initiative to deal with secondary stressors, which can lessen the emotional significance of the project failure. During this time, the individual has the chance to recuperate emotionally, and switching back to a loss orientation after this recuperation (without instantly beginning to ruminate over negative thoughts and emotions) can further diminish the individual’s emotional bond with the failed project. Thus, engaging in oscillation orientation can—over time—lessen the negative emotional experience caused by entrepreneurial project failure. However, a limited oscillation orientation is only marginally effective since employees are likely to remain in either orientation for too long.

  Grief, Coping Self-Efficacy, and Subsequent Entrepreneurial Projects

  Researchers have recently used social cognitive theory (Bandura 1986) to gain stronger insights into human functioning, with a particular emphasis on self-regulation in individuals coping with trauma (Benight et al. 1999). Similar to failure, trauma involves an event that causes a negative emotional response that may impede people’s normal functioning (Janoff-Bulman 1992). Coping entails the thinking and acting individuals utilize to handle the internal and contextual demands of specific stressful circumstances (Lazarus and Folkman 1984a, b). Coping is initiated “in response to the individual’s appraisal that important goals have been harmed, lost , or threatened [generating] negative emotions that are often intense” (Folkman and Moskowitz 2004: 747). When the entrepreneurial project represents the loss, it generates grief that is likely to be powerful and internalized. Thus, coping with project failure involves the thoughts and actions employees utilize to recover from negative emotions experienced in response to project failure .

  A core component of social cognitive theory is that “people tend to avoid activities and situations they believe will exceed their coping capabilities, but they readily undertake challenging activities and pick social environments they judge themselves capable of managing” (Wood and Bandura 1989: 365). This judgment of one’s capabilities relates to self-efficacy. Specifically, self-efficacy denotes “beliefs in one’s capabilities to mobilize the motivation , cognitive resources, and courses of action needed to meet given situational demands” (Wood and Bandura 1989: 408). Many scholars argue that self-efficacy is specific to a particular task (Bandura 1997). In the specific context of entrepreneurship, self-efficacy has been defined as “the degree to which individuals believe they are capable of performing the tasks associated with new venture management” (Forbes 2005: 628). In the specific case of corporate entrepreneurship, coping self-efficacy “refers to the beliefs in one’s capabilities to mobilize the motivation , cognitive resources, and courses of action needed to recover from major setbacks arising from the organization’s entrepreneurial activities” (Shepherd et al. 2009a: 593).

  Individuals with low coping self-efficacy feel there is a large gap between their coping capabilities and harmful elements of their context. The belief of being unable to cope often intensifies the threat’s severity and increases anxiety over other dangers. Someone with low coping self-efficacy in addition believes that he or she is incapable of clearing their minds of invasive thoughts (Bandura 1997; Lazarus and Folkman 1984a, b). People with high coping self-efficacy, on the other hand, believe that they can avoid cognitive overload, have control over intrusive thoughts, and proactively shape situations to make them less threatening (Bandura et al. 1985). For instance, Benight et al. (1999) reported that for Hurricane Opal survivors, perceived coping self-efficacy had a significant mediating effect in explaining who did not have lasting distress from the trauma (Benight et al. 1999).

  In addition to helping individuals cope with trauma , self-efficacy also appears to mediate the association between experiencing a substantial loss and recovering from grief. For example, Benight et al. (2001) conducted a study of 102 widows whose husbands had died within the last year, finding that those higher in coping self-efficacy regarding their loss had experienced lower levels of distress and higher overall psychological and physical health (Benight et al. 2001). Recovering from grief enables individuals to continue with their lives and commit to new courses of action (Fisher 2001). As Benight and Bandura (2004: 1133) noted, “a robust sense of coping self-efficacy is
accompanied by benign appraisals of potential threats, weaker stress reactions to them, less ruminative preoccupation with them, better behavioral management of threats, and faster recovery of well-being from any experienced distress over them.” Thus, coping self-efficacy has an important function in explaining people’s reactions to stress, the usefulness of the strategies they employ for coping with hostile circumstances (Bandura 1997), and their persistence when faced with challenges (Bandura 1986).

  Building on findings related to coping self-efficacy in the face of traumas caused by the loss of loved ones and natural disasters , my (Dean) colleagues and I (Shepherd et al. 2011) argued that individuals’ coping self-efficacy is heterogeneous, which helps explain variation in how effective organizational members are at managing the failure of an entrepreneurial project.