Attribution Theory and Entrepreneurship
Attribution Theory: Why We Blame Entrepreneurs for Failure
Why do we blame founders when a startup crashes, but blame the economy when our projects fail? The answer lies in Attribution Theory.
Developed by Austrian psychologist Fritz Heider in the 1950s, the fundamental assumption of this theory is that humans are driven to find causes for success and failure. However, we rarely do this objectively. We use cognitive shortcuts that lead to specific biases.
The Two Core Biases
Attribution theory identifies two main ways we distort reality regarding success and failure:
- Self-Serving Bias: Individuals attribute their own success to internal factors (talent, hard work) but attribute their failures to external forces (bad luck, the economy).
- Fundamental Attribution Error: When we watch others fail, we attribute it to internal causes (laziness, incompetence) rather than considering the environmental conditions that may have caused the failure.
The Impact on Entrepreneurs and Investors
This psychological framework creates a dangerous trap for entrepreneurs. When a founder fails, stakeholders (investors, customers, media) naturally drift toward the Fundamental Attribution Error.
They assume the venture failed because the founder did something wrong or lacked skill. They rarely give enough weight to external factors like market timing or regulatory shifts. If stakeholders could overcome this bias and look at the true causes—both internal and external—capital allocation would look more like a true meritocracy.
The "Winner-Takes-All" Cycle
This theory also explains the "Virtuous Circle" of success. When an entrepreneur wins once, observers attribute it to "genius" (Internal/Stable) rather than luck (External/Unstable). This attribution leads to more funding and support, acting as a self-fulfilling prophecy that helps them keep winning.
The 3 Dimensions of Attribution
Psychologists categorize these attributions based on three specific dimensions: Locus of Control (Internal vs. External), Stability (Do things change?), and Controllability.
As shown in the chart below, there are 8 distinct combinations:
- If a factor is Internal, Stable, and Controllable, we attribute success to Effort.
- If a factor is External, Unstable, and Uncontrollable, we attribute success to Luck.
Video: Attribution Theory Explained
References
Shaver, K. G., Gartner, W. B., Crosby, E., Bakalarova, K., & Gatewood, E. J. (2001). Attributions about entrepreneurship: A framework and process for analyzing reasons for starting a business. Entrepreneurship Theory and Practice, 26(2), 5-28.
