Today entrepreneurial failure is rarely associated with positive concepts such as learning, experience and opportunity. When failure is mentioned, often this leads to the idea of disappointment, sadness and depression. This stigma has perforated the very essence of entrepreneurship in the EU.
In the EU the consequences of bankruptcy makes loan eligibility difficult for individuals suffering from low credit scoring. In accordance with the present day credit crunch, entities like the European institutions are posing questionable efforts in alleviating loan qualification. Furthermore the European legislation is not harmonized: the European Commission is taking action based on studies showing that the request to repay debts for a period exceeding three years strongly discourage the decision to start a new business.
Alessandro Niccolo Tirapani*
On December 18th ThinkYoung, a Brussels-based think tank committed to lobbying for young Europeans, launched its Fail2Succeed Campaign at the European Parliament. The conference served to shed light on the characteristics and causes of stigma failure among European entrepreneurs. The campaign is based on the results of a research study conducted, which includes a European youth survey. The survey of more than 1,200 responses revealed that the stigma of failure plays a central role in restraining young entrepreneurs from starting a business both at an institutional and social level. The campaign aims to empower young people with the tools to learn from failure and to grasp what can be improved with entrepreneurial failure
Our research has shown that in terms of personal growth young people perceive failure positively, but in terms of reputation failure is generally perceived as negative. Data highlighted a striking gap: on one hand, 83% perceive failure as positive for personal development, more than 70% would give someone who failed a second chance, and one out of two prefer financing a project for an individual who has experienced failure. On the other hand, 50% are convinced that after failure future professional partners will perceive them negatively and 62% think that individuals close to him/her will not grant them a second chance. Ultimately 75% is convinced that social expectations are the main cause hindering the recovery after a failure.
In the EU the consequences of bankruptcy makes loan eligibility difficult for individuals suffering from low credit scoring. In accordance with the present day credit crunch, entities like the European institutions are posing questionable efforts in alleviating loan qualification. Furthermore the European legislation is not harmonized: the European Commission is taking action based on studies showing that the request to repay debts for a period exceeding three years strongly discourage the decision to start a new business. Nevertheless, the real need to intervene is on a national level. MEP Jędrzejewska, of Poland, contends that stigma of failure is manifested in the lack of social security for the self-employed, a scenario similar in countries like Italy and Spain.
Regarding access to finance, banks by definition are risk averse: the lack of venture capitalists further restricts access to credit for those who do not hold a perfect credit record. Eventually, in the business world the stigma of entrepreneurial failure is harmful in terms of innovation: the whole notion of ‘failure’ inhibits individuals from abandoning a given project in order to embark on a new one that could in essence be riskier but more innovative. The stigma could also inhibit financing for a potential new innovative project.
ThinkYoung has consulted several experts and developed solutions. At an institutional level, we are collaborating with the Centre for European Studies and the European Commission to harmonize the bankruptcy legislation, especially for those companies based in more than one Member State. But, as a think tank, our vocation is to give birth to an informed debate, connect ideas and reshape the image of the entrepreneurs. Changing the reputation of entrepreneurs in Europe is one of the objectives of our campaign to overcome the stigma of entrepreneurial failure, along with the role of entrepreneurs as a whole. According to the Eurobarometer , 57% of Europeans think that entrepreneurs take advantage of the others’ work, percentage getting higher and higher as the crisis unfolds. As well, the European educational system often punishes mistakes, either directly, by instilling a whole culture of ‘there is only one right way to do things’, or indirectly, by not offering an environment where youngsters can fail safely. As a direct consequence, young Europeans have little experience of failure: only 10% of respondents faced it directly. And when we are to face something obscure, stereotypes and fears proliferate.
* ThinkYoung researcher