Entrepreneurial role models, fear of failure, and institutional approval of entrepreneurship: a tale of two regions

Abstract

Studies on the influence of entrepreneurial role models (peers) on the decision to start a firm argue that entrepreneurial role models in the local environment (1) provide opportunities to learn about entrepreneurial tasks and capabilities, and (2) signal that entrepreneurship is a favorable career option thereby reducing uncertainty that potential entrepreneurs face. However, these studies remain silent about the role of institutional context for these mechanisms. Applying an extended sender-receiver model, we hypothesize that observing entrepreneurs reduces fear of failure in others in environments where approval of entrepreneurship is high, while this effect is significantly weaker in low-approval environments. Taking advantage of the natural experiment from recent German history and using data from the Global Entrepreneurship Monitor Project, we find considerable support for our hypotheses. The final publication is available at Springer via http://dx.doi.org/10.1007/s11187-015-9695-4.