How Feelings and Friendship Factor Into Startup Success (and Failure)

A quarter of U.S. entrepreneurial ventures fail after a year. More than half don’t make it past year five. Given that, how do entrepreneurs react to a downturn in their financial situations? Do they cut their losses and close up shop, or do they hang in there? That may depend on the makeup and the closeness of the team involved in decision-making, particularly if they are friends. A new report from Wharton and City University of London finds that “hope trumps fear” when it comes to entrepreneurs dealing with potential failure. “Which Matters More? Group Fear Versus Hope in Entrepreneurial Escalation of Commitment,” was authored by Wharton management professor Sigal Barsade, entrepreneurship and organizational behavior scholar Tori Huang, and Vangelis Souitaris, entrepreneurship professor at the Cass Business School at City University of London.