The Times Australia
The Times World News

.
Men's Weekly

.

Life’s big moments can impact an entrepreneur’s success – but not always in the way you’d expect

  • Written by Pi-Shen Seet, Professor of Entrepreneurship and Innovation, Edith Cowan University
Life’s big moments can impact an entrepreneur’s success – but not always in the way you’d expect

Entrepreneurs are the lifeblood of any innovative economy.

New business creation has been shown[1] to have a significant and positive impact on economic growth, innovation and job creation. But it isn’t easy, and most new businesses fail[2].

woman works on laptop while a child is drawing on the same table nearby
Starting a new venture is often a family affair. ergonofis/Unsplash[3]

When someone starts a business, they usually aren’t doing it alone – their whole family forms part of the journey[4]. All of them can experience the emotional rollercoaster of entrepreneurship.

This obviously flows in the other direction as well – founders’ personal lives have their own big ups and downs.

Big positive changes in a family – including job promotions, weddings and new babies – and negative changes – such as when someone sadly passes away – can really shake things up for someone trying to start a business.

Yet only minimal research[5] has looked into the extent of these effects on new venture creation.

In a recently published study[6], we looked at how big family events affect the success of new ventures.

Surprisingly, our findings reveal that by making entrepreneurs overconfident, certain kinds of positive family events can have a bigger detrimental effect on new venture survival than negative ones.

Emotions have complicated effects

We used data from the Australian Household, Income and Labour Dynamics (HILDA) survey[7] to analyse the emotions[8] caused by major family events that entrepreneurs experience.

Our study found that many of these family events had the influence you’d expect based on both intuition and past research – positive events typically helped and negative events typically harmed new venture survival.

closeup of two hands, one puts wedding ring on the other
Major positive family events can significantly impact an entrepreneur’s emotional state. PeopleImages.com - Yuri A/Shutterstock[9]

But existing research may oversimplify[10] this connection. The structure of a family – their relationships, emotions and goals – can affect an entrepreneur’s mental state and decision-making in complicated ways.

The effect on founders’ confidence levels is particularly important. Confidence is necessary to start a business, but can become a problem in excess when entrepreneurs overestimate their own abilities.

Notably, some positive events can lead to overconfidence, which could take the form of being overly optimistic about the extent of one’s abilities[11], or overestimating the accuracy[12] of one’s own beliefs.

And perhaps counter-intuitively, we found that overconfidence resulting from positive family events had a negative impact on new venture survival. This impact was bigger than the impact of explicitly negative events.

Why might this be happening?

Two key theories from psychology may help explain why overconfidence ends up being harmful.

Two men work on laptops, one smiles
Emotions play a significant role in our decision-making. Priscilla Du Preez/Unsplash[13]

First “affect-as-information theory[14]” suggests that our emotions serve as a kind of compass, guiding us to understand whether a situation is beneficial or harmful.

When entrepreneurs feel good due to a positive family event, like marriage to a childhood sweetheart, they may lean on their existing knowledge and heuristics.

Second, entrepreneurs may succumb to “affect priming[15]”, which suggests that emotions influence decision-making by automatically bringing up related ideas and memories.

Such priming may not just influence what they think, but also how they think. For example, if entrepreneurs are in a good mood, their mind will offer up memories linked to positive emotion – whether relevant or not – to help them make decisions.

These theories suggest that major family events can influence an entrepreneur’s confidence by subtly and automatically adjusting how they evaluate opportunities and risks in decision-making.

Read more: Emotional intelligence is the key to more successful entrepreneurs[16]

On the one hand, positive family events may lead to a more holistic thinking style and rapid decision-making. This can be beneficial for entrepreneurs who need to make quick and efficient decisions under time and resource constraints[17].

However, if entrepreneurs are too confident, believing that their abilities alone can make up for any lack of information, positive family events may just reinforce this overconfidence[18].

Like other people, when entrepreneurs think they’re better at things than they actually are, they may begin to believe tasks are easier than they really are.

This can lead to errors in judgement that seriously harm new ventures.

Man using laptop frustratedly covers face with hands
Overconfidence can make us more prone to make mistakes. Perfect Wave/Shutterstock[19]

How does the research help entrepreneurs?

Our study highlights the embeddedness of family in the entrepreneurial process.

Entrepreneurs need to be aware of the need to carefully manage their own emotional state, particularly their confidence levels.

Entrepreneurship training and support programs often focus solely on business strategies to make new ventures succeed. This research suggests it is also important to incorporate elements like maintaining emotional health, managing major family events and accessing support.

Read more: Entrepreneurs are facing a mental health crisis — here's how to help them[20]

References

  1. ^ shown (papers.ssrn.com)
  2. ^ most new businesses fail (doi.org)
  3. ^ ergonofis/Unsplash (unsplash.com)
  4. ^ whole family forms part of the journey (doi.org)
  5. ^ minimal research (doi.org)
  6. ^ recently published study (doi.org)
  7. ^ survey (melbourneinstitute.unimelb.edu.au)
  8. ^ analyse the emotions (doi.org)
  9. ^ PeopleImages.com - Yuri A/Shutterstock (www.shutterstock.com)
  10. ^ oversimplify (doi.org)
  11. ^ overly optimistic about the extent of one’s abilities (doi.org)
  12. ^ overestimating the accuracy (www.researchgate.net)
  13. ^ Priscilla Du Preez/Unsplash (unsplash.com)
  14. ^ affect-as-information theory (doi.org)
  15. ^ affect priming (psycnet.apa.org)
  16. ^ Emotional intelligence is the key to more successful entrepreneurs (theconversation.com)
  17. ^ quick and efficient decisions under time and resource constraints (doi.org)
  18. ^ overconfidence (doi.org)
  19. ^ Perfect Wave/Shutterstock (www.shutterstock.com)
  20. ^ Entrepreneurs are facing a mental health crisis — here's how to help them (theconversation.com)

Read more https://theconversation.com/lifes-big-moments-can-impact-an-entrepreneurs-success-but-not-always-in-the-way-youd-expect-230436

Times Magazine

Effective Commercial Pest Control Solutions for a Safer Workplace

Keeping a workplace clean, safe, and free from pests is essential for maintaining productivity, protecting employee health, and upholding a company's reputation. Pests pose health risks, can cause structural damage, and can lead to serious legal an...

The Science Behind Reverse Osmosis and Why It Matters

What is reverse osmosis? Reverse osmosis (RO) is a water purification process that removes contaminants by forcing water through a semi-permeable membrane. This membrane allows only water molecules to pass through while blocking impurities such as...

Foodbank Queensland celebrates local hero for National Volunteer Week

Stephen Carey is a bit bananas.   He splits his time between his insurance broker business, caring for his young family, and volunteering for Foodbank Queensland one day a week. He’s even run the Bridge to Brisbane in a banana suit to raise mon...

Senior of the Year Nominations Open

The Allan Labor Government is encouraging all Victorians to recognise the valuable contributions of older members of our community by nominating them for the 2025 Victorian Senior of the Year Awards.  Minister for Ageing Ingrid Stitt today annou...

CNC Machining Meets Stage Design - Black Swan State Theatre Company & Tommotek

When artistry meets precision engineering, incredible things happen. That’s exactly what unfolded when Tommotek worked alongside the Black Swan State Theatre Company on several of their innovative stage productions. With tight deadlines and intrica...

Uniden Baby Video Monitor Review

Uniden has released another award-winning product as part of their ‘Baby Watch’ series. The BW4501 Baby Monitor is an easy to use camera for keeping eyes and ears on your little one. The camera is easy to set up and can be mounted to the wall or a...

The Times Features

Running Across Australia: What Really Holds the Body Together?

How William Goodge’s 3,800km run reveals the connection between movement, mindset, and mental resilience As a business owner, I’ve come to realise that the biggest wins rarely com...

Telehealth is Transforming Healthcare Services in Australia

It has traditionally not been easy to access timely healthcare in Australia, particularly for people who live in remote areas. Many of them spend hours on the road just to see a...

Launchd Acquires Huume, Strengthening Creative Firepower Across Talent-Led Marketing

Launchd, a leader in talent, technology and brand partnerships, has announced its acquisition of influencer talent management agency Huume from IZEA. The move comes as the medi...

Vietnam's "Gold Coast" Emerges as Extraordinary Investment Frontier and Australian Inspired Way of Life

$2 Billion super-city in Vung Tau set to replicate Australia's Gold Coast success story A culturally metamorphic development aptly named "Gold Coast" is set to reshape Vietna...

Choosing the Wrong Agent Is the #1 Regret Among Aussie Property Sellers

Selling your home is often one of the largest financial transactions you’ll make, and for many Australians, it’s also one of the most emotional. A new survey of Australian home se...

Travel Insurance for Families: What Does it Cover and Why it’s Essential

Planning a family trip is exciting, but unexpected mishaps can turn your dream vacation into a stressful ordeal. That’s where travel insurance comes in—it’s your safety net when ...