Learning from Failure: The Making of Entrepreneurial Leaders Open Access
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Failure is a built-in component of the entrepreneurial journey due to its high levels of uncertainty and risk. Despite being difficult and challenging, failure represents one of the most valuable experiences that entrepreneurial leaders will ever have the (mis)fortune to engage in. This dissertation investigated how and when failure contributes to an individual's transformational leadership through learning. A moderated mediation model was proposed and then tested using multisource data from CEOs and managers of small and medium-sized information technology enterprises in the United States and Finland. Results revealed that the influence of failure experience on transformational leadership was fully mediated by learning. When failure related positively to learning, learning positively mediated the relationship between failure experience and transformational leadership. When the relationship between failure and learning was negative, the mediation turned negative. In other words, the value of failure experience for one's transformational leadership was determined by whether or not, and to what extent, one exhibited learning behaviors. Further, while the relationship between the personal saliency of failure and learning was positive in general, individuals who had stronger emotion regulation ability were better able to manage the negative emotions and thus enjoyed a steeper learning slope than those with weaker emotion regulation. Both the strength and direction of the relationship between the number of terminated businesses was a function of learning goal orientation. That is, for individuals with a high learning goal orientation, the number of previously terminated businesses was positively associated with their current learning behaviors. In contrast, for entrepreneurs with a low learning goal orientation, the number of terminated businesses related negatively to learning behaviors. Findings of this study can be applied in designing training, education, and mentoring programs for entrepreneurial leaders or in guiding venture capitalists' investment selection decisions.