The Dark and Destructive Downsides of Entrepreneurship

Researchers, professors, and journalists routinely shine a light on the benefits of entrepreneurship, leaving struggling and would-be entrepreneurs—and almost everyone else—in the dark about the steep downsides, according an Academy of Management Discoveries (AMD) Guidepost.

“Entrepreneurship is a tool—a tool that (like a superpower) can be used for good (think Luke Skywalker) or for evil (think Darth Vader),” Dean A. Shepherd of the University of Notre Dame wrote in “Researching the Dark Side, Downside, and Destructive Side of Entrepreneurship: It Is the Compassionate Thing to Do!”

Entrepreneurship gone bad can hurt the entrepreneurs themselves, their colleagues and loved ones, and even society as a whole, he said.

Shepherd identified three potentially dangerous elements of entrepreneurship:

• Dark side—when entrepreneurs experience negative psychological and emotional reactions. “In any entrepreneurial action there’s going to be some mix of positive and negative aspects. Sometimes there are lots of positives, sometimes there are lots of negatives. One example could be, my business is going well, but my marriage is failing,” he said.

• Downside—when entrepreneurs suffer financial losses and social stigma. “You could be losing money. Or making less than you expected. Or maybe you founded a venture with a friend, and due to conflicts, you’re no longer friends,” he explained.

• Destructive side—when entrepreneurial ventures hurt people or social resources around them. “Some entrepreneurs play within the rules to benefit themselves at the expense of society. In one research study, I and my colleagues explored how entrepreneurs may say they value the environment, yet they disengage those values in order to take actions to pursue opportunities to make them rich, but destroy the environment. Logging trees to make paper, for example,” he said. “Many entrepreneurs think they need to exploit opportunities to succeed. They might pursue opportunities even if the opportunities go against their own values and morals. There’s so little oversight for entrepreneurs, and they’re almost always the sole decision-makers. They don’t have someone to say, ‘Hang on a second, that doesn’t make sense.’ Bad people can do bad things, but good people can do bad things, too, under certain circumstances.”

“I call for the need for more research on the dark, down-, and destructive side of entrepreneurship—what are their dimensions, why do they generate suffering, and how we can reduce them and speed recovery? Such a stream of research holds the potential to make an important, compassionate contribution,” Shepherd wrote. “I started my scholarly journey into the dark side of entrepreneurship after my father’s business failure caused him to suffer greatly. I was interested in understanding this darkness to help people like my father anticipate negative outcomes of entrepreneurship and reduce their suffering.”

Shepherd explained the consequences of his father’s failed venture in his Academy of Management Review article, “Learning from Business Failure: Propositions of Grief Recovery for the Self-Employed.” He wrote: “Even though we normally think of grief in the context of the death of a loved one, a broadly similar reaction can occur when a close relationship is ended through separation or when a person is forced to give up some aspect of life deemed to be important. When our family business died, my father exhibited a number of worrying emotions. There were numbness and disbelief that this business he had created 20-odd years ago was no longer ‘alive.’ There was some anger toward the economy, competitors, and debtors. A stronger emotion than anger was that of guilt and self-blame: he felt guilty that he had caused the failure of the business, that it could no longer be passed on to my brother, and that, as a result, he had failed not only as a businessperson, but also as a father. These feelings caused him distress and anxiety. He felt the situation was hopeless and became withdrawn and, at times, depressed.”

“We know entrepreneurs can feel grief over business failure, and … we know that grief can be a source of depression, anxiety disorders, and mortality [including suicide],” he wrote in the AMD Guidepost. “By shedding more light on the dark side of entrepreneurship, scholars can:

• “Help entrepreneurs reduce anxiety stemming from the uncertainty surrounding what they are experiencing and make sense of their psychological and emotional reactions.”

• “Explain why some entrepreneurs experience more darkness than others (more or less loneliness) as a step toward developing prescriptions to reduce the associated suffering.”

“Entrepreneurship involves uncertainty. Uncertainty means that we’re going to have failures. We need to recognize that we will likely have failures, so we can manage failure better as part of the entrepreneurial process,” Shepherd said. “We can help entrepreneurs set their expectations better, they can learn from failures more quickly, hopefully feel less grief, know how to better deal with their grief, and be able to move on.”

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