Failure factors in small and medium-sized enterprises: qualitative study from an attributional perspective

The objective of this study is to identify factors for poor performance and failure faced by small and medium-sized enterprises (SME) and to investigate a potential bias between real causes and attribution for stranding. In order to achieve this objective, we have adopted entrepreneurial personal story explorations in eight Portuguese SME. Our research reveals that the most important factors are limited access to finance, poor market conditions, inadequate staff, and lack of institutional support, as well as co-operation and networking. Hereby, at a first glance, external factors were more often cited, but qualitative analysis revealed that internal factors are imminent and not satisfactorily recognized. Even though some owner–managers showed a certain awareness regarding their internal weaknesses, many problems such as lacking strategy and vision, low educational levels, and inadequate social capital are not sufficiently recognized. Therewith, we found a strong attribution error when SME owner–managers judge the causes of their ventures’ unsuccessful performance and failure. Finally, we draw conclusions and suggestions for policymakers, small business owners, consultants, and researchers.

[1]  J. Brüderl,et al.  Network Support and the Success of Newly Founded Business , 1998 .

[2]  M. Zuckerman,et al.  Attribution of success and failure revisited, or: The motivational bias is alive and well in attribution theory , 1979 .

[3]  Sylvie K. Chetty,et al.  The Case Study Method for Research in Small-and Medium-Sized Firms , 1996 .

[4]  W. Gardner,et al.  Perceptions of politics and organizational cynicism: An attributional and leader–member exchange perspective , 2004 .

[5]  Hans Landström,et al.  FINANCIAL BOOTSTRAPPING IN SMALL BUSINESSES: EXAMINING SMALL BUSINESS MANAGERS' RESOURCE ACQUISITION BEHAVIORS , 2001 .

[6]  Monder Ram,et al.  Case-Study Method in Small Business and Entrepreneurial Research , 2004 .

[7]  N. Bosma,et al.  The Value of Human and Social Capital Investments for the Business Performance of Startups , 2004 .

[8]  J. Mata,et al.  Life Duration of New Firms , 1994 .

[9]  Mirjam van Praag,et al.  Business Survival and Success of Young Small Business Owners: An Empirical Analysis , 2001 .

[10]  Matthias Almus,et al.  Growth of New Technology-Based Firms: Which Factors Matter? , 1999 .

[11]  Arjen van Witteloostuijn,et al.  Human capital, social capital, and firm dissolution , 1998 .

[12]  Edward McAuley,et al.  Measuring Causal Attributions: The Revised Causal Dimension Scale (CDSII) , 1992 .

[13]  Carolyn Y. Woo,et al.  Survival of the Fittest? Entrepreneurial Human Capital and the Persistence of Underperforming Firms , 1997 .

[14]  Michael Gort,et al.  The Evolution of Markets and Entry, Exit and Survival of Firms , 1996 .

[15]  J. Mata,et al.  The survival of new domestic and foreign‐owned firms , 2002 .

[16]  Bing-Sheng Teng,et al.  Corporate Entrepreneurship Activities Through Strategic Alliances: A Resource-Based Approach Toward Competitive Advantage , 2007 .

[17]  B. Weiner.  An attributional theory of achievement motivation and emotion. , 1985, Psychological review.

[18]  林月雲,et al.  Success factors of small- and medium-sized enterprises in Taiwan: An analysis of cases , 1998 .

[19]  David B. Audretsch,et al.  Innovation, growth and survival , 1995 .

[20]  Peter Preisendörfer,et al.  Der Erfolg neugegründeter Betriebe : eine empirische Studie zu den Chancen und Risiken von Unternehmensgründungen , 2007 .

[21]  C. V. Praag,et al.  The Roots of Entrepreneurship and Labour Demand: Individual Ability and Low Risk Aversion , 2001 .

[22]  Barton A. Weitz,et al.  Attributions in the Board Room: Causal Reasoning in Corporate Annual Reports , 1983 .

[23]  J. Cope,et al.  Learning by doing – An exploration of experience, critical incidents and reflection in entrepreneurial learning , 2000 .

[24]  D. Teece.  Capturing Value from Knowledge Assets: The New Economy, Markets for Know-How, and Intangible Assets , 1998 .

[25]  M. Dowling.  Erfolgs- und Risikofaktoren bei Neugründungen , 2002 .

[26]  B. Weiner,et al.  A theory of motivation for some classroom experiences. , 1979, Journal of educational psychology.

[27]  M. Dowling,et al.  Firm networks: external relationships as sources for the growth and competitiveness of entrepreneurial firms , 2003 .

[28]  Fernando E. García-Muiña,et al.  Explaining and measuring success in new business: The effect of technological capabilities on firm results , 2007 .

[29]  J. Barney.  Firm Resources and Sustained Competitive Advantage , 1991 .

[30]  D. Storey.  Understanding the small business sector , 1994 .

[31]  Dale T. Miller,et al.  Self-serving biases in the attribution of causality: Fact or fiction? , 1975 .

[32]  Daniel P. Forbes.  Are some entrepreneurs more overconfident than others , 2005 .

[33]  H. Kelley.  Attribution theory in social psychology , 1967 .

[34]  J. Brüderl,et al.  Survival Chances of Newly Founded Business Organizations , 1992 .

[35]  David B. Audretsch,et al.  New Firm Survival: New Results Using a Hazard Function , 1995 .

[36]  Andrew Zacharakis,et al.  Differing Perceptions of New Venture Failure: A Matched Exploratory Study of Venture Capitalists and Entrepreneurs , 1999 .

[37]  Abby Ghobadian,et al.  Total quality management in SMEs , 1996 .

[38]  Jintong Tang,et al.  Developing an entrepreneurial typology: the roles of entrepreneurial alertness and attributional style , 2008 .

[39]  Timothy Bates.  Entrepreneur Human Capital Inputs and Small Business Longevity , 1990 .

[40]  S. Birley.  The Role of Networks in the Entrepreneurial Process , 1985 .

[41]  F. Heider.  The psychology of interpersonal relations , 1958 .

[42]  J Wagner,et al.  The Post-entry Performance of New Small Firms in German Manufacturing Industries , 1994 .

[43]  Mark J. Martinko,et al.  Attribution Theory: An Organizational Perspective , 1995 .

[44]  Lew Perren,et al.  Small Business and Entrepreneurial Research , 2002 .

[45]  A. van Witteloostuijn,et al.  Human capital, social capital, and firm dissolution , 1998 .

[46]  John P. Ulhøi,et al.  Knowledge‐intensive entrepreneurship and human capital , 2003 .

[47]  R. Weber.  Basic Content Analysis , 1986 .

[48]  M. Patton,et al.  Qualitative evaluation and research methods , 1992 .

[49]  Jean Hartley,et al.  Case study research , 2004 .

[50]  Timothy Bates,et al.  Analysis of young, small firms that have closed: delineating successful from unsuccessful closures , 2005 .

[51]  P. Jennings,et al.  The Performance and Competitive Advantage of Small Firms: A Management Perspective , 1997 .

[52]  W. Neuman,et al.  Social Research Methods: Qualitative and Quantitative Approaches , 2002 .

[53]  David B. Audretsch,et al.  New-Firm Survival and the Technological Regime , 1991 .

[54]  Kelly G. Shaver,et al.  A longitudinal study of cognitive factors influencing start-up behaviors and success at venture creation , 1995 .

[55]  M. Kakati.  Success criteria in high-tech new ventures , 2003 .

[56]  Peter Preisendörfer,et al.  Fast-Growing Businesses , 2000 .

[57]  Sir Gilbert Simpson.  Jade software: Getting ready to tackle america , 2003 .

[58]  Mário Franco,et al.  Collaboration among smes as a mechanism for innovation: An empirical study , 2003 .

[59]  S. Spinelli,et al.  New Venture Creation: Entrepreneurship for the 21st Century , 1999 .

[60]  Marc Cowling,et al.  Employment change in independent owner-managed high-technology firms in Great Britain , 1995 .

[61]  Marc J. Dollinger,et al.  Entrepreneurship: Strategies and Resources , 1994 .