From failure to leadership capital: how entrepreneurial setbacks build founder value

Purpose Although entrepreneurial failure has primarily been examined through recovery and learning perspectives, considerably less attention has been devoted to understanding how failure may contribute to future leadership capital. Drawing on experiential learning theory, intellectual capital theory and signaling theory, this study aims to develop and test a framework explaining how entrepreneurial failure contributes to entrepreneurial leadership capital through experiential learning processes. Design/methodology/approach The study uses survey data collected from 736 entrepreneurs across France, Germany, the United Arab Emirates, Lebanon and Saudi Arabia. The hypotheses were tested using partial least squares structural equation modeling. Findings The findings show that entrepreneurial failure positively influences experiential learning, which subsequently strengthens entrepreneurial leadership capital. Entrepreneurial leadership capital further increases investor confidence and team commitment in subsequent ventures. The results also demonstrate that intelligent failure strengthens the relationship between entrepreneurial failure and experiential learning. Originality/value To the best of the authors’ knowledge, this study introduces entrepreneurial leadership capital as a distinct form of intangible strategic capital emerging through adversity-driven learning. The findings suggest that entrepreneurial failure may strengthen future legitimacy and stakeholder confidence when entrepreneurs transform adversity into adaptive leadership capability.