The purpose of this paper is to provide a process view into moments of entrepreneurial crisis within the venture formation process caused by environmental stressors. A new construct is conceptualized, the entrepreneurial breaking point (EBP), as a critical and potentially insurmountable moment of crisis caused by an entrepreneur’s appraisal of environmental threats during a new venture’s formation.
To develop the EBP within a process model, this study builds upon previous environmental frameworks by expanding upon and infusing a situated social cognitive approach with a stress perspective.
The theoretical framework developed sheds light on the complex person-environment interaction that can create an EBP, the process of experiencing an EBP, how individuals vary in their activation of coping resources to respond to an EBP and how an EBP can ultimately result in new venture exit, sustained performance or growth.
The paper discusses implications for entrepreneurs during these moments of crises, including suggesting the use of trusted, impartial third-parties to overcome individual weaknesses, increasing awareness of the various environmental threats and finding a balance between goal-related commitment and adaptation.
This paper contributes to the existing literature by operationalizing and contextualizing a special case of socio-cognition under duress, filling an identified need for process work, exploring some reasons for EBP response variation across different entrepreneurs and elaborating on how the behavioral outcomes of an EBP may affect venture performance.
The authors are grateful to Sandip Basu, Peter Bryant, Maria A. Halbinger, Reginald Tucker and Elena Vidal for their constructive feedback provided at several stages of this paper’s development.
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