Is it contagious? The effect of fear of failure on employee satisfaction

Fear of failure is a negative emotion among entrepreneurs at all stages of the entrepreneurial journey. However, prior research focuses on entrepreneurs in the aspiration stage or individual-level outcomes. Drawing on emotional contagion theory, we suggest that entrepreneurs’ fear of failure is transmitted to their employees, influencing their work experience. We use an exploratory mixed-method design combining survey and secondary data for the quantitative analysis (study I) and conducted interviews with entrepreneurs for the qualitative analysis (study II). We find that the entrepreneur’s fear of failure is negatively related to employee satisfaction. A context characterized by low participativeness in strategic decision-making or an entrepreneur’s low internal locus of control strengthens the negative relationship. Our research sheds light on the emotional contagion processes in entrepreneurship and extends the theory of emotional contagion by introducing participative strategic decision-making as a team environment and entrepreneurs’ locus of control as an individual trait.