When the Business Becomes the Self: Identity Fusion and the Hidden Psychology of Small Business Failure

This paper examines the hidden psychological costs of long-term small business ownership by introducing the Founder Drift Model, a four-stage framework explaining how early entrepreneurial motivation can gradually deteriorate into identity fusion, boundary erosion, and exit paralysis. Drawing on identity fusion theory, work–life boundary theory, and the existential psychology of Søren Kierkegaard, the paper reframes entrepreneurial failure as an identity process rather than a purely strategic or financial one. Through practical examples and an applied self-distinction framework, the study offers founders, mentors, and policymakers new tools for recognising and preventing the quiet erosion of the entrepreneurial self.