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 risk-taking 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.