TUM Management Insights

Sexual prejudice in entrepreneurship – How sexual orientation influences the harshness of business failure evaluations

Those who are homosexual are often stigmatized in society and at the work place. For some of them, becoming leaving employment and becoming an entrepreneur is the only way to be open about their sexual orientation without being stigmatized at work. What happens, however, if these entrepreneurs fail and their failure is perceived by the general public? Will they be stigmatized for both, the failure and their sexual orientation?

In an article published in the Journal of Management Studies, Professor Shepherd of the Kelley School of Business at Indiana University and Professor Patzelt of the TUM School of Management address this question and explore how 212 people of the general public in two German towns (Munich and Leipzig) evaluate failed entrepreneurs depending on their sexual orientation. In an experimental setting, the participants evaluated more than 6,500 hypothetical failed entrepreneurs, who differed in terms of their sexual orientation (homosexual vs. heterosexual) and the environmental friendliness of their failed venture’s technology. Specifically, participants assessed how much the entrepreneurs should be blamed, feel shame, and receive punishment for the failures.

The study shows that entrepreneurs who are homosexual receive harsher evaluations for their failures than those who are heterosexual. Interestingly, this effect was similarly strong for different types of participants. For example, to a similar extent men and women evaluated failed entrepreneurs who were homosexual more harshly than those who were heterosexual. Similarly, the participant’s age, city of origin, socio-economic status, education, empathy, and own experiences with failure either as an employee or as an entrepreneur did not significantly influence the overly harsh failure evaluations of entrepreneurs who are homosexual. And finally and perhaps most strikingly, even their experiences with individuals who are homosexual in their own social environment did not significantly influence the harsh evaluation of failed entrepreneurs who are homosexual as compared to those who are heterosexual.

Overall, the results of the study suggest that, first, there is still a strong and prevailing prejudice in society against those who are homosexual. Situations of business failures do not seem an exception – failed entrepreneurs who are homosexual seem to face similar prejudice than non-entrepreneurs who are homosexual. This prejudice seems to be similarly present across different groups of the population. Moreover, the findings provide evidence of entrepreneurship as a double-edged sword for individuals who are homosexual. On the one hand, becoming an entrepreneur can provide an opportunity to escape sexual prejudice at the work place. On the other hand, however, in case of business failure those who are homosexual seem to be particularly stigmatized – not only for their failures, but also for their sexual orientations. Sadly, to escape stigmatization entrepreneurs who are homosexual might consider keeping their failures hidden from public even more than those who are heterosexual. There seems to be considerable room for improving our society’s tolerance with respect to different sexual orientations.

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