Exploring fear of failure in nascent entrepreneurship: The role of self‐efficacy and the moderating effects of the institutional context

Abstract This study draws upon social cognitive theory and institutional theory to develop a multilevel model that synthesizes both socio‐cognitive and country‐level, institutional determinants of fear of failure (FoF) in nascent entrepreneurship. It specifically examines the direct effect of individual self‐efficacy on FoF at the pre‐entry stage and explores the interaction effects of both informal and formal institutions on this relationship. We merge data from the Global Entrepreneurship Monitor (GEM) and the World Economic Forum (WEF) surveys for a large sample of individuals in 49 countries. Our results show that individual self‐efficacy reduces the emotion of FoF pre‐entry. However, the intensity of this relationship depends on the formal institutional context, with self‐efficacy more likely to decrease FoF in countries with dynamic policy environments and more funding available for entrepreneurship. Informal institutions, captured by the social approval of entrepreneurship, do not seem to exert a significant effect on this relationship.