Academy of Management Learning and Education, 2004, Vol. 3, No. 3, 274 287.

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Educating Entrepreneurship
Students About Emotion and
Learning From Failure
DEAN A. SHEPHERD
University of Colorado at Boulder

As theory develops and increases our understanding of the role of emotion in learning
from failure, entrepreneurship educators have the opportunity to reflect these
advancements in their pedagogies. This requires a focus on how students feel rather
than on how, or what, they think. I offer suggested changes to pedagogy to help
students manage the emotions of learning from failure and discuss some of the
challenges associated with measuring the implications of these proposed changes. I then
expand my scope to explore possibilities of educating students on how to manage their
emotions to avoid failure and, more generally, improve their emotional intelligence and
for organizations to improve their ability to help individuals regulate their emotions.
........................................................................................................................................................................

Entrepreneurship theory focuses on how to create
and grow businesses through the discovery and
exploitation of opportunities to bring into exis-
tence future goods and services (Shane & Venkat-
araman, 2000; Venkataraman, 1997) as well as how
to avoid failure (McGrath, 1999).1 Entrepreneurship
scholars acknowledge that not all attempts to
launch and grow a business are successful, but
even when failure occurs the entrepreneur has an
opportunity to learn from the experience, and
thereby improve his or her chance of success in the
next entrepreneurial endeavor (Minniti & Bygrave,
2001).
The above concepts are reflected in the follow-
ing textbook quotes: Businesses fail, but entrepre-
neurs do not. Failure is often the fire that tempers
the steel of an entrepreneurs learning and street
savvy (Timmons, 1999: 47). In order to succeed
one first has to experience failure. It is a common
pattern that the first venture fails, yet the entrepre-
neur learns and goes on to create a highly success-
ful company (Timmons, 1999: 30). However, this
process of learning from failure can be emotionally
1
McGrath (1999) argues that there is a tendancy to view failure
negatively, which introduces a pervasive bias in entrepreneur-
ship theory and research (p. 13). An anti-failure bias by entre-
preneurs can be considered a reasonable emotional reaction to
the loss of something important. The concern is that such a
response will interfere with peoples (and organizations) ability
to make sense out of the experience (McGrath, 1999; Shepherd,
2003).
difficult. Hisrich and Peters (2001) offer advice on
how the entrepreneur can deal with business
failure:
First and foremost, the entrepreneur should
consult with his or her family. . . . This discus-
sion will also help alleviate some of the stress
of dealing with bankruptcy. Second, the en-
trepreneur should seek outside assistance
from professionals, friends, and business as-
sociates. . . . Third, it is important to not try to
hang on to a venture that will continually
drain resources if the end is inevitable. . . .
The time spent could be more effectively used
to either start over or do something else (pp.
595596).
These textbook excerpts suggest a number of
important points.2 First, failure is an important
source of learning for entrepreneurs. Second, bank-
ruptcy is a difficult and stressful event for the en-
trepreneur and his or her family. This implies that
business failure can generate a negative emo-
tional reaction. Third, entrepreneurs are advised to
seek outside assistance, primarily for sympathy
and emotional support. Such advice implies that
2
Textbooks often reflect the topics that are important to a par-
ticular domain of study and therefore serve as an important
resource for a professor to guide his or her presentation of a
topic (Coppola & Strohmetz, 2002).

274
2004 Shepherd
there is a recovery process and that this process
can be enhanced or hindered by the actions of the
entrepreneur and those who are asked to provide
assistance. Fourth, they acknowledge that, for
most entrepreneurs, it is not easy to cut the emo-
tional attachment between oneself and a failing
business.
As theory develops and increases our under-
standing of the role of emotion in learning from
failure, educators have the opportunity to reflect
these advancements in their pedagogies for entre-
preneurship courses. In a recent article (Shepherd,
2003), I argued that entrepreneurs grieftheir
emotional response to the loss of their business
interferes with learning from the experience but,
through a dual process of grief recovery, emotions
could be managed in a way that minimizes inter-
ference and maximizes learning. Specifically, en-
trepreneurs should oscillate between a loss-orien-
tation process and a restoration-orientation
process to best use negative emotions to focus
their attention on the event while simultaneously
not allowing that focus to become cognitively in-
efficient. Although the context for this model hap-
pened to be self-employed individuals who lost
their independent businesses due to poor perfor-
mance, it is also applicable to individuals who are
emotionally attached to corporate new venture
projects that eventually fail.3
Furthermore, organizations can learn from fail-
ure (McGrath, 1999), that is, the failure of a project
or a division but obviously not those events that
cause the demise of the organization itself. Such
organizational learning requires individual level
learning to be transferred to an organizations
shared belief system through internalization and
routinization (Huy, 1999, 2002; Simonin, 1997). Like
at the individual level of analysis, an organiza-
tions ability to learn from a particular experience
can be influenced by emotion, and, these emotions
can be managed (Huy, 2002). Huy (1999) introduces
the concept of emotional capability to capture an
organizations ability to acknowledge, recognize,
monitor, discriminate, and attend to its members
emotions, and it is manifested in the organizations
norms and routines related to the feeling (p. 325).4
Based on the above studies, I propose that theo-
ries on how entrepreneurs and entrepreneurial or-
ganizations can manage grief in order to enhance
learning from failure can be used in the classroom
3
Grief (a negative emotional response) can arise from the loss
of anything the individual holds as important (Archer, 1999).
4
Unless otherwise specified, the descriptions offered apply to
both the individual and organizational level of analysis.
275
by educators to better help students learn this spe-
cific form of emotional management. However, as
Wren, Buckley, and Michaelsen (1994) point out,
classroom theory must be delivered in a way that
makes it relevant to the practice of management.
This can sometimes be a challenge, especially
when the focus is on how students feel rather
than on how, or what, they think. To meet such a
challenge will require more extensive changes to
an entrepreneurship pedagogy than simply adapt-
ing the content of a current lecture, which raises
two broad questions for educators: What methods
can be used to teach new theories on emotion
and learning from failure in a way that has prac-
tical relevance? What are the implications of these
proposed changes?
My primary purpose here is to address the above
educational questions. First, I offer suggested
changes to pedagogy to help students manage the
emotions of learning from failure. Second, I discuss
some of the challenges associated with measuring
the implications of the proposed changes to peda-
gogy and offer researchers suggestions on how
they can be overcome. I focus on two implications:
first, the impact of the new pedagogy on students
ability to manage their emotions and learn from
failure, and second, the possible impact of the new
pedagogy on the students level of anxiety and
their motivation to pursue an entrepreneurial ca-
reer. Third, I expand the scope of the article in
terms of content and pedagogy. On content, I move
beyond the emotions after failure to explore possi-
bilities in educating students on how to manage
their emotions to avoid failure and, more gener-
ally, improve their emotional intelligence and how
to enhance the emotional capability of an organi-
zation. On method, I offer an introduction to a fu-
turistic method (affective computing) that I hope
will soon be available to educators for enhancing
students ability to manage their emotions. Fourth,
I look at who can teach and research this topic and
detail some important next steps. Finally, I offer
some concluding comments.
DEVELOPING A PEDAGOGY TO HELP STUDENTS
MANAGE THE EMOTIONS OF LEARNING FROM
FAILURE
Entrepreneurship educators are well versed in in-
creasing students knowledge through lectures, by
providing vicarious experiences through guest
speakers and case studies, as well as by providing
direct experiences through simulations, consulting
projects, and internships. With this in mind, I now
discuss how these methods (and some new ones)
can be used within existing courses to educate
276 Academy of Management Learning and Education
students about managing emotions associated
with failure (grief) in order to minimize interfer-
ence and maximize learning from the experience.5
Lectures
As with all lectures, the content is highly reliant on
available theory. In Table 1, I propose the layout of
a possible lecture. First, relying on entrepreneur-
ship texts, the professor establishes the existence
of an emotional relationship between entrepre-
neurs and their businesses, offers statistics on the
likelihood of business failure, and highlights the
point that failure represents an opportunity to
learn despite the difficulty in doing so. Second, the
professor utilizes bereavement theory from psy-
chology on to explore processes of coping with,
and recovering from, grief over the loss of a loved
one. Finally, the professor transitions from death of
a loved one to business failure to explore the role
of emotional management in maximizing ones
ability to learn from business failure.
Lecturing on emotions, although not necessarily
an oxymoron, is likely to be very difficult because
it is a topic that is less about what we think and
more about how we feel. To provide students in-
sight into the emotions of business failure, lectures
should be complemented with (or replaced by)
methods that provide indirect and/or direct experi-
ences of the emotions associated with failure. To
this end I offer suggestions for indirect (guest
speakers and cases) and direct (reflections, role-
plays, and simulations) experiences.
Indirect Experiences
Guest Speakers
Guest speakers could be used in entrepreneurship
classes to articulate their insights into business
failure and the means of coping with that failure.
Ideally, one guest speaker of a recently failed busi-
ness would talk about the negative emotions of
business failure, and a second guest speaker
would build upon this discussion to detail how he
or she was able to cope with grief, recover, and
then learn from the experience. However, there are
a number of challenges in effectively using this
approach. First, educators need to find entrepre-
neurs of failed businesses, which itself can be a
5
This article does not offer a review of the literatures of emo-
tion, information processing, or failure, rather it builds on re-
cent theoretical advancements to explore possible changes to
entrepreneurship pedagogy necessary for the delivery of this
content and to explore the implications of these proposed
changes.
September
difficult task. Second, these entrepreneurs must be
prepared to talk about the emotions of business
failure. Third, and the major challenge with guest
speakers on this topic, is to overcome the possibil-
ities of self-reporting and retrospective reporting
biases.6 For example, entrepreneurs of failed busi-
nesses might be motivated to diminish the role of
emotions in order to appear more rational.
A third-party observer may provide additional
insights into an entrepreneurs emotions over busi-
ness failure and the recovery process. Such experts
might include accountants and lawyers that spe-
cialize in bankruptcy as well as financiers, such as
venture capitalists. Family members of entrepre-
neurs of failed businesses would likely also pro-
vide considerable information about how the en-
trepreneur felt, how the entrepreneur managed his
or her emotions, and eventually how the entrepre-
neur learned from failure. These third-party
sources of information are likely to be less bi-
ased than those reports coming directly from the
entrepreneur.
Given the above discussion, guest speakers may
provide only marginal insight into their personal
emotional response to failure (although this de-
pends on the individual guest speaker), but they
are likely to provide less-biased accounts on the
emotions of failure at the organizational level. For
example, a CEO could provide an account of
project failure that details the norms and routines
in place that allow the organization to monitor and
attend to its members emotions. The discussion
can then explore questions such as How were
such routines first developed? and What (and
how many) resources are allocated to this emo-
tional management of project failures?
Case Studies
Existing case studies could be used as a spring-
board for a discussion on an individuals emotions
and his or her ability to learn from a failure expe-
rience even though these cases are only indi-
rectly related to the emotional aspect of the situa-
tion. For example, Myra Hart provides two Harvard
Business School Press cases about an entrepre-
neur, Eric Wood. The first case, Eric Wood A (Hart,
1996a), describes the early career of an MBA who
6
In a research setting, Huber and Power (1985) and Golden
(1992) propose that retrospective reports provide data that have
errors and biases due to respondents motivation to bias the
results (Cannell & Henson, 1974; March & Feldman, 1981) and
there are also issues related to the perceptual and cognitive
limitations of respondents (Duncan, 1979; Fischhoff, 1982; Nis-
bett & Ross, 1980).
2004 Shepherd 277

TABLE 1
Theory Lecture on How Individuals Can Manage Emotions Associated With Business Failure in Order to
Maximize Learning From the Experience

Stage 1 Pre-readings
(i) A chapter from the course textbook on why people become entrepreneurs.
(ii) A chapter from the existing course textbook on business failure and bankruptcy.
Journal article(s) on grief over the loss of a loved one (e.g., Nolen-Hoeksema, McBride, & Larson, 1997; Stroebe & Schut,
(iii) 1999) or trauma (chapters from Janoff-Buhlman, 1992).
(iv) Journal article on entrepreneurs grief over business failure (e.g., Shepherd, 2003).
Stage 2 Entrepreneurs and their businesses (approximately 10 min.)
(i) Explain the reasons entrepreneurs start their own businesses.
(ii) Use these reasons to highlight entrepreneurs emotional attachment to their businesses.
(iii) Point out the statistics on business failure.
(iv) Separate the entrepreneur from the businessBusinesses fail: Entrepreneurs learn.
(v) Relate back to entrepreneurs attachment to their business and describe their emotions when a business is lost.
(vi) Describe how emotions interfere with processing information and with learning.
Stage 3 Grief and the recovery process (approximately 25 min.)
(i) Introduce the grief literature to highlight how people feel when they lose a loved one.
(ii) Describe the negative emotions and the physical, psychological, and physiological outcomes of grief.
Describe the two dominant perspectives of coping with griefthe loss and restoration orientationsand the advantages
(iii) and disadvantages of each.
(iv) Talk through the dual process of recovering from grief over the loss of a business.
(v) Bring together these two coping mechanisms and explain the dual process of grief recovery.
Stage 4 Recovering from grief over business failure (approximately 40 min.)
(i) Reinforce the attachment of entrepreneurs to their businesses.
(ii) Generalize the negative emotions of grief over the loss of a loved one to grief over the loss of a business.
(iii) Detail how grief interferes with the process of learning from failure.
(iv) Talk through the dual process of recovering from grief over the loss of a business.
(v) Relate the recovery process to learning from failure and entrepreneurs willingness to try again.

went to work in a small business, bought the com-
pany, and is now contemplating an acquisition to
expand the business (Harvard Business School
Press Web site). This case could be used for its
original purpose of educating students on growth
management, but it could also be used to highlight
the emotional relationship that entrepreneurs
have with their businesses.
The second case, Eric Wood B (Hart, 1996b), de-
scribes Erics purchase of the much larger Shaw
Co. and describes the operating and financial
problems that ensue, leaving Eric considering the
option of bankruptcy. Issues include the overlap of
business and personal finances, as well as the
mechanics and implications of bankruptcy (Har-
vard Business School Press Web site). Again, this
case could be used for its original purpose of high-
lighting issues of bankruptcy, but it could also be
used for a discussion of Eric Woods likely negative
emotional reaction to the decline of his business.
The discussion could be extended further to spec-
ulate on Woods emotional state if the business
were to fail, and to explore ways in which he could
best deal with the negative emotions that would be
evoked so that he could learn from the experience.
Because avoiding failure is a primary focus of
entrepreneurship theory (McGrath, 1999), it is not
surprising that cases stop before the organization
goes out of business. But there is a need for some
cases to focus on the emotions of an entrepreneur
who has lost his or her business due to poor per-
formance (or other reasons such as a terrorist act).
Ideally, Professor Hart would write a part C to the
above casesif indeed the business did failthat
would detail the emotions and the behaviors of
Eric Wood. A hypothetical example of content from
Eric Wood part C is offered in Appendix A. Such a
case study would provide a more solid foundation
for a discussion on the emotions of failure and the
management of those emotions. I hope that case
writers take up this challenge.
Unlike at the individual level, numerous cases
are available from which a class can explore the
emotions associated with project failure within en-
trepreneurial organizations. For example, a Lon-
don Business School case on Virata provides de-
tails of an organization that has a superior
technology (Asynchronous Transfer Mode) that
could revolutionize the broadband world of com-
puter networking. In the early days of the organi-
zation, management believed that it was too early
to tell which potential application of the technology
would be the most profitable, so they supported two
projects. Eventually, management made the decision
to pursue one business and terminate the other.
The content of this case is similar to many others
278 Academy of Management Learning and Education
used in classes of entrepreneurship, strategy, and
innovation where a project is terminated or is im-
plemented and fails. These cases may not directly
provide details of the emotional dynamics within
the organization, but they can still be used as a
springboard to discuss the way in which organiza-
tions can (or should) manage the emotions of their
members when faced with a projects failure. For
example, How do you think the R&D teams felt
knowing that only one of the two projects was
going to be accepted? When the announcement
was made, what do you think was the reaction of
the losing team? Winning team? If backing coped with the loss of a loved one, that these skills
alternate and competing projects within an orga-
nization is a means of dealing with the uncertainty
inherent in high-velocity markets, then what
should the organization do to build its norms and
routines so that the emotions of its members are
managed in a way that maximizes organizational
learning (and retains valuable employees)?
Direct Experiences
Despite obvious differences between educating
people to deal with death and educating stu-
dents to deal with business failure, I explore the
death education literature for hints on effective
methods for helping people learn about emotions
and managing those emotions in the face of losing
something important.7 I chose the death educa-
tion literature because it is based on solid psy-
chological theories and methods and also has a
strong practitioner perspective, that is, helping
people deal with the emotions associated with the
loss of a loved one. This literature suggests that
reflections on grief, role-plays, and simulations are
effective educational methods (e.g., Hutchison &
Scherman, 1992; Ratner & Song, 2002; Tamlyn &
Caty, 1984). Before I assess and adapt these meth-
ods for the entrepreneurial context, it is important
to point out that encouraging students to directly
experience negative emotions (and to learn from
them) can be traumatic and is therefore probably
best undertaken with the assistance of a psychol-
ogy professorpreferably one that specializes in
bereavement or trauma.
Reflections on Grief
Gould (1994) proposes a class structure that is used
to develop students understanding of grief over
7
One important difference is that most people will face the
grief of losing a loved one, whereas in an entrepreneurship
class only a subset will become entrepreneurs and only a sub-
set of that will lose a business.
September
the loss of a loved one by making students become
more attached to the material at an affective level.
This educational method begins with something
autobiographical through individual introspec-
tion, and then moves to a more general under-
standing of the phenomenon through group discus-
sion. Adapting this method to failure would likely
provide students the chance to see the commonal-
ities between the feelings that they have experi-
enced and those they will likely experience as an
entrepreneur of a failed business. They might feel
empowered by the knowledge that they have
are transferable to the loss of a business, and that
these skills can be further improved. In Table 2
below, I offer a version of Goulds (1994) educa-
tional method adapted for use in entrepreneurship
classes.
Building on the reflections of grief exercise
proposed in Table 2, this method can also be used
to develop a deeper understanding of managing
the emotions of failure at an organizational level.
Students prepare by reflecting on their own expe-
riences of interacting with organizations when
dealing with an important loss. This organization
could be ones immediate family, extended family,
school, church, or funeral parlor. Students then
share their stories with others in a small group.
The group then compiles a list of the things the
organization said or did to acknowledge, recog-
nize, monitor, discriminate, or attend to ones emo-
tions. Using the process described in Step 2 of
Table 2, a definition of an organizations emotional
capability to deal with loss emerges and a list of
emotional behavior enacted by organizations is
constructed (with those behaviors that encourage a
loss orientation listed on the left-hand side of the
white board and those that encourage a restora-
tion orientation on the right). The discussion can
then transition to the emotions of project failure
and focus on the pros and cons of certain organi-
zational behaviors and how these can be com-
bined (or oscillated) in order to manage the emo-
tions of organizational members and maximize
learning from the failure experience. It is impor-
tant to end this experience with a discussion of
how these behaviors can be internalized by the
organization in the form of norms and routines.
Role-Play
Role-plays ask students to imagine, think, and be-
have as if they were someone else in a particular
situation. They involve as-if experimentation
(Mercado, 2000) and provide students with a
unique opportunity for active learning in a safe
2004 Shepherd 279

TABLE 2
Approach to Encourage Reflections on Loss and Grief Over Business Failure

Step Activity

1 Students prepare for the class by reflecting on their own experiences of losses and the associated feelings and
behaviors. It is reinforced that these losses should be significant, such as the death of a loved one. Each student is
asked to document these stories of loss and complete a grief awareness exercise (e.g., Hogan, Greenfield, & Schmidt,
2001) and be prepared to share one story with a small group of fellow students.
2 In groups of three or four each student describes one story and the group compiles a list of the expressed feelings and
behaviors. From this information, the groups are asked to define grief, prioritize symptoms, and prioritize coping
behaviors. This information should be illustrated in a diagram, which is presented to class. As a class, students give
the teacher the symptoms of grief to list on one white board. A definition of grief emerges. Questions, comments, and
examples are used to revise these generalizations. The teacher then calls for coping behaviors, which are listed on the
left of the board if the behavior is loss oriented and on the right if it is restoration oriented. The students are then
asked what is common about the list on the left and what is common about the list on the right. Although the labels
are likely to be different, the discussion emerges on a classification of loss-orientated and restoration-orientated
behaviors.
3 The teacher leads discussion back to the first board (list of symptoms and definition of grief) and asks students whether
this definition and list symptoms applies to the loss of something really important even if that loss is not the death of
a loved one. What are the feelings towards the thing lost that generates grief? Do entrepreneurs feel this way about
the businesses that they create? Therefore are entrepreneurs likely to feel grief over the loss of their businesses?
From the discussion elicited by these questions, it is likely to emerge that losing a loved one is not the same as losing
a business, but one may feel many of the same negative emotions. The students definition can then be compared to
the one offered in Shepherd (2003): a negative emotional response to the loss of a business capable of triggering
psychological, behavioral, and physiological symptoms.
4 Attention is then turned to the two lists of behavior labelled as something along the lines of loss orientation and
restoration orientation. The students are then asked which is best and to justify their choice. Some students will argue
for one approach and some will argue for the alternate, and from this discussion the benefits and limitations of each
will emerge. After sufficiently discussing the former, the teacher asks, How can we get the benefits of both while also
minimizing the associated weaknesses? This question and subsequent discussion will lead to the notion that people
can alternate between the two, and eventually speed up recovery. The teacher can offer and begin a discussion
around the dual models of recovery from grief over the loss of a loved one (Stroebe & Schut, 1999) and the loss of a
business (Shepherd, 2003).

and low-risk environment (Brown, 1994; Egri,
1999; Lehman & Taylor, 1994). The environment is
safe and low risk for students because they can
separate themselves from the character they are
playing, which can be a highly liberating and
important experience (Mercado, 2000). For exam-
ple, many of the inhibitions in expressing ones
emotions are eliminated or minimized with role-
plays. Therefore role-plays are highly effective
for students to learn about attitudes and behaviors,
and as the basis for experiencing different psycho-
logical contexts (Greenberg & Eskew, 1993).8 The fol-
lowing are some examples of possible role-plays
that provide individuals experience the emotions of
failure:
failed and will not be operating from tomor-
row on. The class role plays as devoted em-
ployees upset about losing their jobs.
Role-Play 2: In groups of two, one student can
role play an entrepreneur informing a spouse
of the business failure and the other student
role plays the shocked spouses response and
subsequent discussion.
Role-Play 3: In small groups, role play the
interchange between an entrepreneur of a
failed business who is expressing negative
emotions and a friend providing advice on
how to best cope with the situation.

Role-Play 1: One student prepares and pre-
sents a speech role playing an entrepreneur
informing employees that the business has
8
Hodgkinson (2000) provides an example of role-plays being
used for postgraduate managers and there is evidence of its
used to teach business ethics (1994) and accounting (Craig &
Amernic, 1994).
Role-Play 4: In small groups, role play the
interchange between (a) an entrepreneur of a
recently failed business who still feels nega-
tive emotions when thinking about the lost
business, and (b) an entrepreneur of a failed
business who has recovered from grief,
learned from the experience, and has started
another business.
280 Academy of Management Learning and Education
Role-plays can also be used to provide insight
into the emotions of failure at the organizational
level. This can be achieved through the role-play
interactions of an individual with an organization,
where students can role play both the individual
and the organization. For example,
Role-Play 5: In groups of four, one student can
role play a CEO who must inform his three
researchers that the project they have been
working on for 3 years has been terminated,
and they are to be reassigned to new projects.
Role-Play 6: In groups, role play a manage-
ment meeting where the discussion is to re-
volve around the implications of pursuing
high-risk projects and how the organization
can best learn from each project, regardless
of whether the project is a success or a failure.
Role-Play 7: In small groups, role play the
interchange between two research teams
whose projects recently failed, with one team
part of an emotionally capable organization
and the other, an emotionally ignorant orga-
nization.
Simulations
Simulations offer numerous learning benefits to
business school students (Petranek, 2000; Petranek
& Corey, 1992). They may be particularly useful in
educating entrepreneurship students about grief
and learning from business failure because, as
Bredemeier and Greenblat (1981) point out, affec-
tive and behavioral learning is enhanced with
simulations over traditional modes of learning.
Simulations are currently used in entrepreneur-
ship and strategy classes (see Hindle, 2002; Keys,
1997; Wolfe, 1997; Wolfe & Bruton, 1997). Students
make decisions and track firm performance. Al-
though companies may make losses, few go bank-
rupt.9 I point out this feature of most simulations,
not to be critical of them, but to demonstrate that
not all simulations are well suited to the purpose
of providing students experience with the emo-
tions of business failure. That few simulations al-
low businesses to fail, is probably because these
simulations have been created for strategic man-
9
For example, Paich and Sterman (1993) describe a simulation
where students manage a new product over a 10-year period
and subjects may lose as much money as they like without
facing bankruptcy. The task is therefore more forgiving than
reality since losses leading to bankruptcy in real life can in the
game be offset by subsequent profits (1442).
September
agement classes, and learning from business fail-
ure is not a primary objective of this pedagogy (see
Knotts & Keys, 1997).
One exception is the Small Business Growth
Management Flight Simulator, which simulates
the management of a family business that is fac-
ing a number of economic problems. This simula-
tion helps students gain a deeper understanding of
the different aspects of the business, the environ-
ment, and how ones decisions (primarily related to
financial structure) can limit firm growth and put
its survival in peril. The business can fail for a
number of different reasons. For example,
company failure may be caused by a growth
policy that is not sustainable because of ex-
cessive bank withdrawals aimed at increas-
ing the familys quality of life, both in terms of
current expenses and personal assets. Such a
phenomenon is mainly caused by bias in
profit and cash flow expectations and related
distorted information, combined with entre-
preneurs emotional involvement in coping
with the business/family overlap (Bianchi,
2000: 217).
Active participation in simulations provides stu-
dents the opportunity to unconsciously process all
types of information including emotions, strate-
gies, and feelings (Petranek & Corey, 1992). Specif-
ically, by being actively involved in a failure, stu-
dents likely unconsciously process information
about the negative emotions they feel, strategies to
try and recover from this position, and how those
strategies worked. To maximize learning from
playing the simulation, Petranek and Corey (1992)
propose the complementary use of oral debriefings
and keeping a written journal.
Oral Debriefings. Teachers can engage in a class
discussion designed for students to reflect upon
their emotional experiences evoked by the simula-
tion. To structure this discussion, Petranek and
Corey (1992) propose that the debriefing revolves
around events, emotions, empathy, and explana-
tions. In Table 3, I offer questions to start the dis-
cussion for each of these categories.
Writing a Journal. The final phase requires stu-
dents to record their perceptions of the simulation
by writing a journal. This, unlike the oral debrief-
ing proposed above, represents a personal and
private communication with the professor (Woll-
man-Bonilla, 1989). Students are more likely to
record feelings of pain, humiliation, and anger
than to express them verbally to the whole class.
Writing a journal encourages greater reflection
and introspection (Petranek, 2000). The student also
2004 Shepherd 281

TABLE 3
Questions to Stimulate Discussion in Each Stage of Simulation Debriefing
Stage of Debriefing Questions to Stimulate Discussion

Events Describe the events surrounding the business failure.

Describe the events that happened to you after the business failed.
Emotions How did you feel when you realized the business was going to fail?
What were the emotions that you felt after the business had failed and everyone in the class knew
about it?
Empathy For those entrepreneurs whose business did not fail, what were your feelings toward those that did have
businesses fail?
How would you have felt and acted if you were in their shoes?
Explanation How does this experience relate to the saying Businesses fail: Entrepreneurs learn?
Do real-life entrepreneurs of failed businesses feel this way?

has the opportunity to reflect on others expressed
interpretations of the events, others expressed
emotions about those events, and others ex-
pressed empathy toward the journal writer. Keep-
ing a journal (as well as oral debriefings) provides
students the opportunity to integrate theories of
grief, emotional management, and failure into the
experience of the simulation, which encourages a
higher level of analytical learning (see Petranek,
2000). In summarizing research on the learning
benefits from journal writing, Wollman-Bonilla
states that
. . . journals validate self-expression and per-
sonal response, encourage understanding,
imaging, speculation, questioning and the
shaping of ideas and provide students with
information relevant to their concerns and
problems in the content of their own entries
and teachers response (1989: 113).
MEASURING IMPLICATIONS OF PROPOSED
CHANGES TO PEDAGOGY
Management of Emotions to Learn From Failure
Testing the implications of all types of pedagogy
offer a number of methodological challenges.
These challenges arise primarily from the fact that
students cannot always be randomly assigned to
treatments, extensive evaluations of behavior and
results are often not feasible, and it may not be
possible to hold factors such as instructor, class
size, and concurrent enrollment in other subjects
consistent across treatments (Shaw, Fisher, &
Southey, 1999). Shaw et al. (1999) propose that qual-
ity data on the effectiveness of different pedago-
gies can still be collected through the use of quasi-
experiments with nonequivalent control groups
and recommends a pre-, post-, and then design. A
pre-, post-, and then design highlights, and over-
comes, possible problems with a simple pre- and
posttest using self-reports of competency and also
provides evidence of a deeper level of learning.
To illustrate, students could be asked to self-
report on their competency to manage emotions
using a 7-point scale anchored by very low compe-
tency and very high competency (pretest), followed
by the new course content that allows the students
to experience and learn about managing the emo-
tions of failure. Finally, students are asked again
to self-report on their competency to manage their
emotions using the same 7-point scale (posttest).
The difference (or lack of difference) between the
pre- and postscores provides the basis for an infer-
ence about the effectiveness of new aspects of the
curricula, if, and only if, the meaning of the an-
chors on the measurement scales have been used
the same way for both tests.
However, if the addition of an experiential ses-
sion on the emotion of business failure is effective,
then we expect (or should at least test for) a re-
sponse shift where the new course experience
changes the way that the student thinks about the
anchors of the measurement scales. To capture the
extent of learning (alpha change in terms of a
change in score between pre- and posttest using
common scales, and beta change in terms of a
change in the way the scales anchors are inter-
preted) requires the use of a then measure. A then
measure is a retrospective self-report of ones com-
petency prior to the delivery of the new course
content that is collected after course delivery (at
the time of the posttest). For example, items might
require responses to the following statements: I
worry excessively and I have little control over
my sadness but the above proposed changes in
curricula might change the way students interpret
the concepts of worry and sadness such that
the pre and the then measures are different. The
comparison of then measures to post measures
282 Academy of Management Learning and Education
provides a more accurate picture of the impact of
the new curricula changes because it is unaffected
by response shifts caused by the change in curric-
ulum.
These self-reported measures using a pre-, post-,
and then design could be complemented with the
use of existing surveys capturing an individuals
level of grief (with necessary adaptations to the
business context). Data could then be collected at
multiple time points before, during, and after the
failure event. An example of an existing measure
of grief is the Hogan Grief Reaction Checklist
(Hogan, Greenfield, & Schmidt, 2001) and the Lev-
els of Emotional Awareness Scale (LEAS), an exist-
ing measure that captures, more broadly, indi-
viduals emotional awareness (Lane, Quinlan,
Schwartz, Walker, & Zeitlin, 1990). Such research
might find, for example, that oral debriefings and
journal writings together enable students to more
quickly reduce grief. To provide an indication of
learning, students could be asked to provide an
account of why businesses fail before and after
they experience it in the classroom. The professor
or expert coders could rate these answers for com-
pleteness and/or depth of knowledge.
Anxiety Over Failure and Entrepreneurial
Intentions
If education on the emotions of failure and learn-
ing from the experience can be designed and
taught in a way that does not scare students
away from pursuing entrepreneurship, then we as
educators should have few reservations about in-
tegrating this content into our courses. Possible
reservations are likely to arise if we find that the
proposed changes in pedagogy do cause an in-
crease in death anxiety and diminish students
intentions to become entrepreneurs. This is likely
to be a major concern for those educators who
believe that the primary purpose of entrepreneur-
ship courses is to encourage students to pursue
entrepreneurial careers, provide them the tools
necessary for success, and to avoid failure.
An alternate perspective is that even if educa-
tion on the emotions of failure does increase
anxiety and decrease entrepreneurial intentions,
educators still have an obligation toward their stu-
dents to include this content into their entrepre-
neurship courses. Writing on the topic of grief over
the loss of a loved one, Rosenthal (2001) argues that
death education might not only be enlightening,
but that it can also be therapeutic. Having wit-
nessed the misery of grief suffered by my father
and our family over the loss of the family business,
I believe educators have an opportunity to help
September
entrepreneurs and their loved ones to overcome
grief more quickly, to minimize the negative con-
sequences of grief, and to maximize the benefits
arising from this traumatic event.
Although some studies have found that types of
education about death increase death anxieties
(e.g., Balis & Kennedy, 1977; Mueller, 1975; but see
Mueller [1976] for nonsignificant findings), there
seems to be a growing consensus that death edu-
cation can reduce anxieties about the death of
loved ones (Liviton, 1977; Rosenthal, 2001). For ex-
ample, Rosenthal (2001) found that after an 18-
week course on death and dying for high school
students, their level of death anxiety decreased
significantly. By extension, it is plausible that an
investment of effort by entrepreneurship profes-
sors to teach students about business failure could
minimize students anxiety toward failure. Such a
reduction in anxiety could reduce antifailure bi-
ases (see McGrath [1999] for a discussion on the
negative implications of an antifailure bias).
However, questions about the implications of the
proposed pedagogical changes on the manage-
ment of failure emotions, learning from failure,
and possible failure anxiety need to be addressed
by empirical research. It is a difficult task to deter-
mine whether students who have some education
on the emotions of failure did not become entre-
preneurs but would have done so if this content
was not in their entrepreneurship courses. We can,
however, test the impact of a pedagogy on the
intention to become an entrepreneurintentional-
ity is central to entrepreneurship (Bird, 1988; Katz &
Gartner, 1988; Krueger, 1993; Krueger, 2000). Using
an established scale of entrepreneurial intentions
(and mindful of the design issues detailed above),
researchers can detect changes in entrepreneurial
intention and therefore make inferences about the
implications of the proposed pedagogy on the mo-
tivation of students to pursue entrepreneurial ca-
reers. For example, Krueger (1993) empirically in-
vestigated entrepreneurial intentions by asking
respondents, Do you think youll ever start a busi-
ness?10
Researchers could further explore the implica-
tions of changes in curricula through their impact
on the antecedents of entrepreneurial intentions,
such as perceived feasibility and desirability. For
example, pre-, post-, and then measures of entre-
preneurial self-efficacy could be used to determine
10
Krueger notes that although researchers should be more spe-
cific in terms of the kind of venture, type of industry, and when
intended action will take place, pretesting indicates that global
intentions are still informative (Krueger, 1993; Kruger &
Carsrud, 1993).
2004 Shepherd
changes in an individuals perceived feasibility of
an entrepreneurial career (see Chen, Greene, &
Crick, 1998). A finer grained understanding of
changes in the level of anxiety would require ex-
isting psychological measures (e.g., Abdel-Khalek,
2002) be adapted to the entrepreneurial context.
POSSIBILITIES TO FURTHER HELP
ENTREPRENEURSHIP STUDENTS MANAGE
EMOTIONS
Content
The changes to pedagogy proposed above provide
students insight into the often complex and stress-
ful task of analyzing why failure occurred in order
to learn from the experience. This task can be
made more manageable when the emotions sur-
rounding failure can be regulated (Shepherd, 2003).
Such a process might reveal that failure resulted
from inefficient information processing (Weick,
1990, 1993, 1996). For example, Weick (1990) ana-
lyzed the Tenerife Air disaster to determine the
cause of failure. He proposed that the stress of the
situation (a negative emotional reaction) con-
sumed scarce information-processing capacity,
which decreased cognitive efficiency and resulted
in the disastrous outcome of two planes crashing,
killing 583 people.
Dorner (1996) analyzed simulations of people at-
tempting to solve complex problems to expose
flaws in their thinking and proposed a procedure
based on: (1) defining and redefining goals as the
situation transpires, (2) gathering information so
that models can be formulated that reflect the com-
plexity of the situation, (3) using the information
and model to predict and extrapolate in order to
determine effectiveness in achieving goals, and (4)
planning, deciding, and acting and then replan-
ning, rethinking, and redoing to avoid becoming
stuck in a rut. This procedure was formulated to
take into consideration the storage speed of hu-
man memory (Dorner, 1996).
Both Weick (1990, 1993, 1996) and Dorner (1996)
propose that inefficient information processing
can be a cause of failure. Greater efficiency can be
achieved through certain procedures for problem
solving (Dorner, 1996) and the regulation of emo-
tion (Argyris, 1990; Elster, 1999; Staw, Sandelands,
& Dutton, 1981; Weick, 1990). Therefore, although
the changes in pedagogy proposed above focus on
the emotions after failure and learning from the
experience, there is also an opportunity to expand
the proposed pedagogical changes to further help
students regulate emotions when faced with a
283
complex or stressful situation in order to avoid
failure.
The entrepreneurs task is one that places con-
siderable strain on his or her information-process-
ing ability (Baron, 1998). Therefore maintaining (or
improving) information-processing efficiency ap-
pears to be important for other aspects of the en-
trepreneurial process (i.e., other than after failure
or dealing with an event that could cause failure).
A pedagogy that more broadly addresses emotion
and the management of emotions would likely be
valuable to students who will later be engaged in
entrepreneurial tasks. For example, the proposed
pedagogy above could be broadened from a focus
on an individuals ability to use the dual process
model of grief recovery to maximize learning from
a failure experience or the ability to manage ones
emotions when facing a stressful or complex prob-
lem to a pedagogy that more generally addresses
issues of emotional intelligence. Emotional intel-
ligence refers to the subset of social intelligence
that involves the ability to monitor ones own and
others feeling and emotions, to discriminate
among them and to use information to guide ones
thinking and actions (Salovey & Mayer, 1990).
A Pedagogical Approach of the Future: Affective
Computing?
A future (or futuristic) approach to teaching stu-
dents about their emotions and how to manage
them might be just around the corner. Research is
being conducted on affective computer techniques
(Picard, 1997).
Affective computing relates to, arises from, or
deliberately influences emotions (Picard, 1997: 2).
Picard (2000) argues that wearable devices that
allow people to monitor their emotions will be able
to help the wearer regulate stress and potentially
improve health. These wearable computers moni-
tor emotions by using skin sensors to read four
physiological signalsrespiration, blood volume
pressure, skin conductivity, and muscle tension.
This information on emotions can be used in a
number of ways. As a result of the research at the
MIT lab on affective computing, an affect-adaptive
CD player has been developed that selects music
based on the mood of its user. The educational
benefits of affective computing have already been
recognized: . . . If we can study the emotions and
reasoning in an individual, the affective comput-
ing techniques could be used to produce better
decision-making for people experiencing these
emotions, particularly as they approach difficult
situations (Steele & Steele, 20022003: 237).
Therefore, affective computing could be a useful
284 Academy of Management Learning and Education
tool for providing entrepreneurship students feed-
back about their emotions in particular situations
(e.g., events that occur as part of a simulation). This
feedback is important in developing ones emo-
tional intelligence. For example, a speedier recov-
ery from the grief over the loss of a business can be
achieved if the entrepreneur knows when to switch
from one coping style to anotherwhen the indi-
viduals attention begins to shift focus from the
event to aspects of the grief itself then learning is
likely reduced by emotional interference and the
individual should switch to a restoration-orienta-
tion (Shepherd, 2003: 323). Affective computing can
provide students this information in a simulated
environment and help them to understand when to
switch and the emotional implications of this
switch.
Similarly, affective computing can be used to
help students realize the impact of emotions when
solving complex problems. For example, simula-
tions and affective computing can be used in con-
junction to demonstrate that highly emotional
states can lead to failure, whereas those students
who better manage their emotions are able to avert
disastrous outcomes (i.e., consistent with the work
of Weick, 1990, 1993, 1996). The potential educa-
tional benefits of affective computing likely extend
to other aspects of emotional intelligence that are
important for potential entrepreneurs. It will be
interesting to track the progress of developments
in affective computing, with a view to one day
introducing it to entrepreneurship students.
THE NEXT STEP: WHO WILL TAKE IT AND WHAT
NEEDS TO BE DONE
Educators Prior Knowledge and Proposed
Changes to Pedagogy
As we broaden the possible changes in pedagogy
from emotions associated with the loss of a busi-
ness to the failure to solve complex problems to
more generally managing the emotions associated
with running a business, the content becomes less
distinctive to the entrepreneurship domain. This
creates a potential problem: Do entrepreneurship
educators have the skill and knowledge to be able
to effectively pursue these pedagogies?
There is evidence that more entrepreneurship
scholars are investigating entrepreneurial cogni-
tion and information processing (Mitchell et al.,
2002) and, I speculate, that there is an increasing
number of entrepreneurship educators with back-
grounds in organizational behavior and psychol-
ogy. This understanding of cognition and informa-
tion processing is highly applicable to a deeper
September
understanding of the role that emotion in general,
and grief in particular, can have on decision mak-
ing and behavior. This suggests that there are a
group of educators that might be well qualified for
the pedagogical challenges proposed above. Fur-
thermore, when the proposed pedagogy has an
application beyond entrepreneurship (but still
highly relevant for potential entrepreneurs), we
can look for expertise within other departments in
the school of business or other schools within the
university. Finally, if educators only teach content
that is based on their prior knowledge, then there
is a danger of falling into a competency trap. To
avoid such a trap, and to overcome educators re-
luctance to change their curricula, more research
needs to be done into improving pedagogies and
empirically testing the implications of these
changes. This represents a challenge to both edu-
cators and education scholars and to this end, I
now offer some steps for each group (obviously
some professors fall into both categories).
The Next Steps for Entrepreneurship Educators
1. Maintain currency with theoretical advance-
ments on topics of (a) the emotions of failure,
(b) the role of emotions in causing failure, (c)
the process of learning from failure, and (d)
other work on emotional intelligence and emo-
tional capability that could be applicable to
aspects of the entrepreneurial process.
2. Use information gained in step one to supple-
ment the content of current lectures or as the
basis for new lectures.
3. Seek out potential guest speakers who (a)
manage an organization that experiences
project failures as a result of a conscious strat-
egy of pursuing high-variance projects, (b)
work in organizations with considerable emo-
tional capability, and (c) can articulate the or-
ganizational norms and routines used in the
organization to manage the emotions of its em-
ployees and how this impacts organizational
learning. If such a guest speaker is found, then
use him or her in class.
4. Reanalyze cases that have been used previ-
ously as part of your pedagogy (or look for new
cases) that can be used to stimulate discussion
on the emotions surrounding failure and the
importance of learning from the experience (at
the individual or organizational level). Adapt
existing teaching notes to highlight this new
dimension of the case to encourage class dis-
cussion and learning.
5. Experiment with the proposed methods of re-
flections and role-play. Such experimentation
could first involve using one of these methods
to explore previously covered content. Once
confident with the new method, incorporate it
using the proposed new content.
6. Choose and use simulations to evoke emotions
(hopefully about failure experiences) and then
2004
use oral debriefings and require students to
keep a journal account of the simulation to
maximize the educational benefits of students
emotional experiences.
7. Be entrepreneurial. With increased knowledge
of current theories and the motivation to im-
prove ones pedagogy, educators will likely be
willing to experiment with pedagogies that
provide students emotional experiences (at
first with failure and then other aspects of the
entrepreneurial process) and the opportunity
to learn how to better manage these emotions.
The Next Step for Education Researchers
1. Include in entrepreneurship textbooks new
theoretical advancements on (a) the emotions
of failure, (b) the role of emotions in causing
failure, (c) the process of learning from failure,
and (d) other work on emotional intelligence
and emotional capability that could be appli-
cable to aspects of the entrepreneurial pro-
cess.
2. Write new cases (or put a new spin on old
cases) that provide the basis for student anal-
ysis and discussion on emotion and learning
from failure (from both the individual and or-
ganizational learning perspective).
3. Create more simulations (or adapt existing
simulations) that allow businesses to fail
while an individuals opportunity to partici-
pate in the simulation is not automatically ter-
minated; rather, the students of failed busi-
nesses have the opportunity to learn from the
failure and apply this new knowledge by cre-
ating a new organization.
4. Research the educational benefits of the pro-
posed changes in pedagogy. To conduct such
research requires further work on adapting
and refining existing measures for use with
students in an entrepreneurial context, e.g.,
grief, anxiety, emotional intelligence, and
emotional capability.
5. Test the impact of proposed changes to peda-
gogy on students motivations to pursue entre-
preneurial careers.
6. Distinguish between pedagogies to determine
the most effective approach for students to
learn how to best manage emotions (after fail-
ure or to avoid failure).
7. Continue to develop innovative measuring de-
vices, such as affective computing, that can be
used to provide feedback about students emo-
tions during experiential exercises.
CONCLUSION
In starting this process of adapting recent ad-
vancements in entrepreneurship theory on the
emotions of failure for classroom use, I hope I have
evoked the emotion of educators and education
scholars to further develop the pedagogies pro-
posed and to test their implications. If this peda-
gogical agenda can be advanced, then educators
Shepherd 285
have the opportunity of dramatically improving
the lives of those students who become entrepre-
neurs and experience failure, and, depending on
the results of empirical research, the proposed
changes to entrepreneurship pedagogy could rep-
resent a step toward reducing students antifailure
biases.
Appendix A
A Hypothetical Example of a Case Study on the
Emotions of Business Failure
CASE STUDY
After his business failed, Eric felt anger, guilt, distress, and
anxiety. He knew that he had to get out of this current emotional
state. He tried to think through the sequence of events leading
up to the failure of the business so that he could learn from his
mistakes but every time he thought about the business it made
him feel even more depressed. He thought it would likely make
him feel better if he simply distracted himself from the whole
event by focusing on other aspects of his life, like finding a job,
finding a new house, a new school for the children. While this
was attractive in the short term, would this be detrimental to his
recovery efforts in the long run and to being able to learn from
the failure? Is there anything Eric can do to improve his emo-
tional state, reorganize his life, and also learn from the experi-
ence?
Discussion
From such a case, some students might suggest that Eric should
immediately start another business because this would help
him overcome grief over the loss of the previous business.
However, students will soon realize that there has been no
opportunity for learning, and the same mistakes could be made
again. Attention will turn to speeding recovery. Some will ad-
vocate grief work where Eric should bear the emotional pain
and focus his attention on the events surrounding the busi-
nessprocessing this information will help with recovery and
learning from the experience. Others will argue that distrac-
tions are the best approach and work on the secondary causes
of stress. This discussion will bring out the advantages and
disadvantages of the two coping mechanisms (which can be
recorded and labeled on a white board). The professor can then
ask: Is there any way that Eric could get the advantages of both
without their corresponding disadvantages? This discussion
will highlight the benefits of a recovery process that alternates
between the two coping mechanisms.
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Dean A. Shepherd is on the faculty at the Leeds School of Business, University of Colorado. His
research interest is decision making with regard to failure, opportunity, and strategy. He has
published his research in Academy of Management Review; Journal of Business Venturing;
Journal of Management; Management Science; the Strategic Management Journal, and others.