Moving forward: Balancing the financial and emotional costs of business failure ☆ Dean A. Shepherd a, ⁎ , Johan Wiklund b,1 , J. Michael Haynie c,2 a Kelley School of Business, Indiana University, 1309 East Tenth Street, Bloomington, IN 47405-1701, United States b Jönköping International Business School, P.O. Box 1026, SE-551 11 Jönköping, Sweden c Department of Entrepreneurship and Emerging Enterprises, Whitman School of Management, Syracuse University, 721 University Avenue, Syracuse, New York, United States Received 6 March 2007; received in revised form 14 September 2007; accepted 27 October 2007 Abstract Why do owner-managers delay business failure when it is financially costly to do so? In this paper we acknowledge that delaying business failure can be financially costly to the owner-manager and the more costly the delay, the more difficult the recovery. But we complement this financial perspective by introducing the notion of anticipatory grief as a mechanism for reducing the level of grief triggered by the failure event, which reduces the emotional costs of business failure. We propose that under some circumstances delaying business failure can help balance the financial and emotional costs of business failure to enhance an owner- manager's overall recovery — some persistence may be beneficial to recovery and promote subsequent entrepreneurial action. Published by Elsevier Inc. Keywords: Failure; Entrepreneur; Learning; Negative emotions; Commitment; Passion; Recovery 1. Executive summary A puzzling question has been that of why owner-managers delay business failure when it is financially costly to do so? Business failure occurs when a decline in revenues and/or increase in expenses are of such magnitude that the firm becomes insolvent, and is unable to attract new debt or equity funding. Consequently, the business cannot continue to operate under the current ownership and management. Delaying business failure likely diminishes the owner- manager's salvageable personal equity, and may also require additional personal financial investments to delay insolvency. A dominant explanation for this persistence with a failing business is that these owner-managers' decision making is biased. In other words, these entrepreneurs are wrong. In this paper we offer a possible alternative Available online at www.sciencedirect.com Journal of Business Venturing 24 (2009) 134 – 148 ☆ The authors would like to thank Ethel Brundin, Venkat, and two anonymous reviewers for providing valuable comments on an earlier version of the paper. ⁎ Corresponding author. Tel.: +812 856 5220. E-mail addresses: shepherd@indiana.edu (D.A. Shepherd), johan.wiklund@jibs.hj.se (J. Wiklund), jmhaynie@syr.edu (J.M. Haynie). 1 Tel.: +46 36 15 77 00; fax: +46 36 16 10 69. 2 Tel.: +315 443 3392. 0883-9026/$ - see front matter. Published by Elsevier Inc. doi:10.1016/j.jbusvent.2007.10.002