The importance of tolerance for failure and risk-taking among insurance firms in hyperinflationary Zimbabwe

Abstract

BACKGROUND: At the dawn of the 21st century, Zimbabwe started moving towards dangerous levels of the infamous hyperinflation trajectory that made management of businesses a nightmare. Many businesses failed. AIM: This study seeks to explore if entrepreneurship, and in particular the aspects of risktaking and tolerance of failure, could have saved the few companies that survived the menace that ravaged the insurance industries among many other sectors of the economy. SETTING: The study looks at this particular entrepreneurial behaviour of risk-taking among insurance companies in Zimbabwe during the hyperinflationary environment that ravaged and defied economic logic and fundamentals. Savings were being eroded at a pace faster than anywhere in the world ever before, taking a toll on businesses as they struggled to survive. METHODS: Using a survey sample of insurance companies in Zimbabwe, a quantitative approach was adopted. Questionnaires were used to extract data from participants to establish the nature and extent of risk-taking, and in particular tolerance for failure during this period. Therefore, tolerance of failure in corporate entities is discussed in this article as a critical aspect of risk-taking that enhances entrepreneurial innovation and ultimate prospects of corporate prosperity among insurance companies. A measure is developed to gauge the extent of tolerance of failure from the perspective of employees in the insurance industry in Zimbabwe. RESULTS: The benefit of tolerance of failure or the lack thereof was measured on the dimension of profitability and growth. Results revealed that tolerance of failure is a necessary entrepreneurial virtue that encourages knowledge acquisition by both experimental and experiential learning – a risk element that also spurs entrepreneurial innovation and ultimately encourages both profitability and growth of the business entity, if well managed. CONCLUSION: The study concluded that firms that tolerate failure are more likely to be entrepreneurially innovative and perform better than those that are risk-averse and do not tolerate failure.