Integrating the Dark Side of Competition into Explanations of Business Failures: Evidence from a Developing Economy

In spite of the growing body of literature on the bright side of inter‐firm relationships, limited attention has been paid to the dark side of inter‐firm relationships. Using insights of serial entrepreneurs in a developing economy, we articulate the mechanisms through which adverse rumours and misinformation perpetrated by rivals' firms undermine small businesses and lead to decline and eventual collapse. We uncovered that the rumours were made more potent when combined with other factors such as prior history of poor and faulty products, sensitivity of industry and intense competition from rival firms in reducing the life chance of firms. Our study also uncovered that inter‐firm backstabbing leads former business owners to form a negative perception of former competitors and their organizations even after their business collapsed. We conclude by articulating the theoretical and practical implications.