Little information is available in the literature on the reasons firms disappear. The study of entrepreneurship typically ends when the business is determined either a success or a failure (Dyer, 1994). Few researchers follow the entrepreneurial process from the idea stage to the implementation of the venture, and almost no research follows through to the final stages of a venture. Further, most research in the area of closures tends to equate closures with business failures. The problem with this approach is that it does not allow us to discriminate between a business which has failed and one which has closed for other reasons, perhaps even having closed as a result of accomplishing its original purpose.
Intentions are central and crucial to understanding the overall process of entrepreneurship because intentions establish key initial characteristics for new organizations (Bird, 1988; Katz & Gartner, 1988; Krueger, 1993). Intentions predict and explain future targeted behavior (Krueger, 1993). Despite the continued application and utility of strategic choice theories (Child, 1972; Hambrick & Mason, 1984), little attention has been given to choice or intent in the examination of firm disappearance. Consequently several research questions are left unanswered. For example: Should a firm that has completed its purpose within a targeted lifetime and subsequently been closed be considered a failure? Should this same firm be categorized the same manner as an organization which is forced to close as a result of financial difficulties? Theorists that examine success and failure rates of businesses (Hall, 1994, Williams, 1993) have failed to separate conceptually between a firm that closes and one which actually fails. This study fills the gap in the literature by offering evidence of the differing characteristics of firm closures and failures.
This study also helps to close another major shortcoming in the literature which is that most of research in the area of entrepreneurship and in particular on firm failures/closures has primarily concentrated in the US and on US firms. Research which concentrates on firms within the US may miss important characteristics of the new venture process as well as differences between countries and cultures which a broader, more international view may provide. Gartner & Shane, (1995) found significant differences in the characteristics in the new venture process when taking into account national differences. The characteristics of failures and closures and the reasons that failures or closures occur in the US may be different than that of other countries. Therefore, in order to obtain a more realistic view of the nature of the entrepreneurial firm, and firm processes, research in this area should include the examination of environmental contexts other than the US. McPherson (1996) notes the paucity of information about micro and small enterprises (MSEs) in developing countries and suggests further research into this area.
The purpose of this study is to shed greater light on the characteristics of business disappearance. Using a sample of micro enterprises in the Dominican Republic, for the 1994 through 1995 period, we examine the characteristics of business closures in the Dominican Republic. The study suggests that business failures are but one category of business closures, and that one of the primary differences in the characteristics of those firms which fail as opposed to firms which close can be explained by organizational characteristics .
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Last Updated 03/19/98