Entrepreneurship is the backbone of any free-market economy. Globally, small and medium-sized businesses represent roughly 90 per cent of businesses and employ over 50 per cent of the workforce. They also contribute about 45 per cent to gross domestic product (GDP).
Yet entrepreneurs face many obstacles that threaten their survival, including financial insecurity and market uncertainties. Unsurprisingly, roughly 50 per cent of new ventures fail within the first five years.
In this challenging landscape, entrepreneurs' psychological resilience is a key personal resource and competitive advantage. But how can entrepreneurs develop resilience? And why does psychological resilience benefit entrepreneurs?
Entrepreneurs' psychological resilience
Psychological resilience is made up of two defining elements. First, someone must experience adversity, which threatens their performance or well-being. After experiencing this adversity, a person's recovery to their initial level of performance or well-being is known as positive adaptation. This ability to bounce back after facing an obstacle is resilience.
To understand how entrepreneurs can become more psychologically resilient, we conducted a comprehensive review of existing academic literature by synthesizing results from over 80 published articles. We identified the following factors as essential to building entrepreneurs' psychological resilience.
Attitudes and behaviours: Positive mindsets, meaning, preparedness and reflection after experiencing setbacks further enhances entrepreneurs' resilience.
Learning: Participating in entrepreneurial education programs, like university business courses, and learning how other entrepreneurs successfully cope with adversity and learning from their struggles and failures can help entrepreneurs learn how to bounce back from adversity.
Personal experiences: Resilience also develops from personal experiences, like overcoming the initial challenges of starting a business. In addition, early childhood experiences can be instrumental, like when parents focus on learning opportunities and allow their children to overcome their own challenges.
What makes resilient entrepreneurs unique?
Being resilient might be a prerequisite for having an entrepreneurial mindset. Several studies show that resilient people are more likely to launch new ventures, take over existing businesses and pivot their business during a crisis like the COVID-19 pandemic.
Psychological resilience is also associated with a host of important outcomes, including entrepreneurial success. Resilient entrepreneurs tend to exhibit stronger mental well-being, as psychological resilience helps buffer the everyday stressors of entrepreneurship.
Resilience is also associated with objective and subjective assessments of firm performance. One study found that conveying personal resilience in crowdfunding campaigns leads to superior financial performance, while another showed that psychological resilience significantly improves the probability of venture survival.
5 ways to become more psychologically resilient
Even if you weren't born with an inherent ability to weather every storm that comes your way, you can still learn to become more mentally tough and adaptable. Here are five ways to develop personal resilience so that you can triumph over the next obstacle you face.
Cultivate a growth- or learning-orientated mindset. Prioritize learning over short-term performance, seek out challenges, embrace failures and experiment with ideas, even if you don't achieve immediate success. Adopting a healthy mindset about adversity (like "it builds character") can change how you respond to inevitable bumps in the road.
Proactively learn from others. Seek out formal mentors who can offer advice and knowledge about how to overcome entrepreneur-specific challenges. Invest time in reading about how other entrepreneurs overcame adversity while launching and accelerating a business.
Develop strong social support networks. Social support is critical to overcoming adversity, whether it comes from family, friends, colleagues or mentors. Support networks offer instrumental guidance, like helping entrepreneurs look at problems from new perspectives, as well as emotional support for managing negative emotions and stressful experiences. Find people and organizations you can lean on.
Focus on your core strengths and capabilities to achieve success. Believe in your ability to manage the unexpected. Dive in passionately to what you are building. Passion is the fuel that keeps entrepreneurs motivated and committed to learning, despite obstacles.
Participate in local entrepreneurship programs. By engaging with local programs, entrepreneurs can find and use essential resources, including specific knowledge and industry connections, to help them bounce back when adversity strikes (or even proactively anticipate challenges).
Like building muscle, building psychological resilience takes time, effort and the right technique. By investing in learning, believing in your capabilities and vision, using failure as fuel for growth and leaning on social support, anyone can become a psychologically resilient entrepreneur.
Authors: Kyle Brykman - Assistant Professor of Management, University of Windsor | Alex Newman - Associate Dean (International), Faculty of Business and Law, Deakin University | Julia Backmann - Assistant Professor, UCD School of Business, University College Dublin | Robert J. Pidduck - Assistant Professor, Entrepreneurship & International Management, Old Dominion University | Silja Hartmann - Postdoctoral Research and Teaching Fellow, Department of Management, Freie Universitt Berlin