Do country level constructs affect the relation between self-efficacy and fear of failure?

Abstract

Purpose – This paper aims to show how country level constructs (investment protection, registration cost and legal protection) moderate the relationship between self-efficacy and fear of failure (FoF). Design/methodology/approach – The authors use global entrepreneurship monitor (GEM) data and augment it with country level data for 12 counties from different levels of economic development. The entrepreneurship literature has not yet addressed the micro/macro level influences on FoF to the best of the authors’ knowledge. This paper addresses this lacuna by using multilevel analysis by incorporating state influenced environment effects along with individual traits to explain this phenomenon. Findings – It is shown that higher registration cost, higher degrees of investor protection and less legal protection diminish the effect of self-efficacy on FoF. Furthermore, the effects of the country-level factors outweigh the impact of the individual-level factors on FoF. Research limitations/implications – One of the issues discussed earlier was the construct validity of FoF, the wording of the question in GEM data is phrased such that FoF prevents you from starting a business; this means the response is avoidance. Had the question been worded positively, the responses may have varied. A better measure would have been an index with a scale the shows varying degrees of FoF. Another feature of GEM data is that the cohorts change every year, making it impossible to track the effect of closing a business on perceptual variables such as FoF and skill perception. This requires further scrutiny and analysis. Practical implications – It is noticed that there are regional differences in FoF country rates across various levels of economic development. The authors provide and explain by looking at how these constructs moderate the relation between skill perception and FoF. Thus, countries that have good investment protection may end up with better entrepreneurial activity rates due to mitigating the fear factor. Social implications – Entrepreneurial activity rates can be increased by lowering the negative effect of FoF. This construct is known to be higher among females, which was typically thought to be an individual trait. This research also shows that legal and institutional constructs are actually more important in explaining FoF. Originality/value – The contribution of this paper is that it addresses an acknowledged gap in the literature, in that it explains empirical findings that have not been explained before (at the level this paper does).