The stigma of failure: An international comparison of failure tolerance and second chancing

It is commonly asserted that high rates of entrepreneurship and superior economic performance in the United States is linked to a higher cultural tolerance of business failure. After reviewing cross country patterns of entrepreneurship we develop in this paper a measure of cultural attitudes towards failure which has two components. We term these failure tolerance which captures attitudes towards the risk of a business failing and second chancing which measures the degree of agreement with the proposition that those who have failed should be given a second chance. Using a unique dataset on attitudes to failure for a sample of 9,500 individuals drawn from 19 economies for the year 2002 we show that respondents in the USA appear to have relatively high levels of failure tolerance. However, they are less willing to grant a second chance to those who have tried and failed. We find that having relatively high levels of failure tolerance is not positively correlated with GDP growth. Having a relatively positive attitude towards second chancing across countries is positively related to GDP growth. Taken together these results suggest there is a link between attitudes to failure and economic growth, but it is not the one conventionally assumed in current policy rhetoric which argues that relatively favourable attitudes towards second chancing in the USA explains its more entrepreneurial activity.

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