Hidden Work: Social Image and Entrepreneurship Failures

Through their networks, entrepreneurs in low- to middle-income countries have the opportunity to access valuable financial and informational resources. Many entrepreneurs appear to forego those benefits and prefer to hide their economic activities from their network - for fear of facing a social stigma in case of observable business failure. In a first step, we test the empirical relevance of this idea. We correct entrepreneurs' perceptions of the social stigma they would face in the event of a business failure, and measure its effects on entrepreneurs’ access to their network’s resources and business outcomes. In a second step, we investigate how the actual social stigma, exerted by entrepreneurs’ network members, is affected by the entrepreneurs’ perceptions of that stigma. We thereby shed light on how the perceptions of a social norm influence the social norm itself - and how both can be changed through simple information interventions to unlock entrepreneurial success and job creation.