We combine the attribution theory of motivation and the heuristic-systematic model of information processing to theorize and examine an inverted u-shape relationship between entrepreneurial project failure severity and subsequent project performance. We propose that the u-shape relationship is driven by the interplay of the latent mechanisms of motivation determined by causal attributions for failure and the entrepreneur’s confidence gap (and subsequent reliance on heuristic or systematic information-processing). Because entrepreneurial self-efficacy and resilience are shaped by experience, we further probe how potential differences in attribution, heuristics, and systematic processing may differ between portfolio and hybrid entrepreneurs and explain performance differences as driven by failure severity. We conduct our study in the crowdfunding context, leveraging a unique dataset of 721 observations of single-founder entrepreneurial projects launched between 2016 and 2019 that followed projects that failed to achieve full funding on Kickstarter. Supporting our theory, we find an inverted U-shape relationship between failure severity and subsequent project performance and that this relationship is different for portfolio and hybrid entrepreneurs. Our study contributes to a broader literature on motivation and decision making after failure and advances entrepreneurship literature by offering novel insights into the cognitive boundaries of entrepreneurial attention in response to failure severity.
