Academy of Management

By Daniel Butcher

While entrepreneurs’ success stories get most of the publicity, the dangers they face are rarely talked-about elements of entrepreneurship.

Academy of Management Scholar Dean Shepherd of the University of Notre Dame noted that professors, business-book authors, and other journalists often tout the benefits of entrepreneurship without talking about its downside: Entrepreneurs often struggle and fail, sometimes with bad consequences for themselves, their colleagues, their loved ones, and even society.

“For quite a while, I’ve been researching entrepreneurs losing their business and people working on projects at an entrepreneurial firm when those projects fail,” Shepherd said. “The dark side of entrepreneurship is the negative emotional and psychological costs.

“The downside of entrepreneurship is the loss of your capital, your money, your personal finances,” he said. “And then there’s the destructive side—we always assume that entrepreneurship is doing good for other people, but it may not be.

“There might be some people who are greedy and engage in entrepreneurship that has a net destruction of wealth, so that really actually harms the natural environment or harms other people in order to just benefit themselves, or they didn’t mean to do it, but it just worked out that way.”

Opportunities exist in environments of uncertainty, so failure is going to be part of entrepreneurial endeavors. Entrepreneurs—and the people writing about them—should ask: What about the downside risk?

“Everyone says entrepreneurship is so good, and I do love entrepreneurship, but if we don’t understand the dark side, then how do we help entrepreneurs overcome some of the challenges they face being an entrepreneur, particularly when entrepreneurs pursue opportunities,” Shepherd said.

“We have to be able to help entrepreneurs minimize the potential losses from their action and avoid destructive entrepreneurship,” he said. “If we don’t understand why and how some people destroy societal wealth or the environment, then how are we going to be able to stop them?”

Shepherd highlighted a key question: “How are we going to be able to educate entrepreneurs to make sure that they don’t do that, and that they’re productive, rather than destructive?”

“The whole stream of my research along those lines is to try and really understand the flip side of the coin, because if you don’t understand the flip side, then you don’t understand the coin completely,” he said.

Author

  • Daniel Butcher is a writer and the Managing Editor of AOM Today at the Academy of Management (AOM). Previously, he was a writer and the Finance Editor for Strategic Finance magazine and Management Accounting Quarterly, a scholarly journal, at the Institute of Management Accountants (IMA). Prior to that, he worked as a writer/editor at The Financial Times, including daily FT sister publications Ignites and FundFire, Crain Communications’s InvestmentNews and Crain’s Wealth, eFinancialCareers, and Arizent’s Financial Planning, Re:Invent|Wealth, On Wall Street, Bank Investment Consultant, and Money Management Executive. He earned his bachelor’s degree from the University of Colorado Boulder and his master’s degree from New York University. You can reach him at dbutcher@aom.org or via LinkedIn.

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