Every startup faces a “do-or-die” crisis, but why do some founders pivot successfully while others completely freeze up? A new study reveals that the difference isn’t grit or genius — it’s a highly specific psychological approach to how a founder views their own spending habits.
According to researchers at North Carolina State University, founders who believe they can actively learn to be more frugal possess a massive survival advantage when disaster strikes.
The power of frugal
Published in the Journal of Business Venturing Insights, the study examined how business owners assess their ability to manage and conserve money. The researchers noted a critical divide: some individuals believe frugality is a fixed personality trait that cannot be changed, while others possess a “growth-oriented mindset,” meaning they believe anyone can learn to become more frugal over time.
To test how this impacts business survival, the team surveyed 709 entrepreneurs. After establishing the participants’ baseline views on frugality, the researchers asked them to recall a specific venture-related setback and analysed how they felt, thought, and coped with the challenge.
Bouncing back
The results showed a massive advantage for founders who believe they can change their financial habits.
“The stronger someone’s growth mindset with regard to frugality, the more optimistic they were about future success, the less discouraged they were, and the more effort they put into identifying solutions to their setback,” explained Jeff Pollack, the Lynn T. Clark II Distinguished Professor of Entrepreneurship at NC State.
Specifically, the study found that this growth mindset was associated with:
- Increased adaptability and a strong desire to make positive adjustments.
- A lower likelihood of feeling miserable or getting “stuck” after a failure.
- Greater overall resilience when facing venture-related challenges.
To ensure the accuracy of their results, the researchers successfully replicated the study with an additional 281 participants.
A learned resilience
The most important takeaway for business owners and startup incubators is that this type of financial resilience is not a fixed genetic trait — it is a skill that can be actively developed.
“Mindsets really matter when we face setbacks – and everyone faces setbacks,” Pollack said. “But mindsets can be changed. Entrepreneurs and organisations that support entrepreneurs should be aware of mindsets and take steps to improve mindsets in a way that will make entrepreneurs more resilient to challenges”.
Co-author Jon Carr, the Jenkins Distinguished Professor of Entrepreneurship at NC State, echoed this practical sentiment. “The real takeaway is that you can do something about this,” Carr said. “Having the right mindset matters”.
