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RESULTS

The results indicate that hypothesis 1 was supported as the Chi Square tests attest that a significant number of firms that would traditionally be classified as failures, should be classified as closures. The conceptual and empirical separation of firm closures and failures we believe to be an important contribution to entrepreneurship theory as we can begin to examine the role of intentions and firm characteristics in determining final outcomes for the firms. An understanding of when exactly can we talk about a firm being a failure versus one that just left the business because of other reasons, is fundamental for our discussion of the rates of new venture failure and for our understanding of the characteristics and behavior of the entrepreneurs.

Hypothesis 2 predicted that the likelihood of firm closure of failure is explained by firm age, size, source of funding, location, gender, and job prospects of the owner. The results partially support the hypothesis as the analysis of variance yielded significant effects for location, gender and job prospects for the owner after the venture. The results of the discriminant analysis indicate that by far the most important prediction of closure or failure is whether the owner was able to find employment or start a new venture after firm disappearance. This result provides strong support to the efficiency–wage theory for LDC’s and the idea that a business ownership in LDC’s might not just be an end objective, but could also be viewed as an alternative form of training an employment for the entrepreneur. While in developed countries entrepreneurship and firm ownership are viewed as the ultimate goal of budding entrepreneurs, the results of this study indicate that a new paradigm is warranted when studying the nature of firm ownership in LDC’s and that different intentions and outcomes are present when examining the process of new venture creation in other cultures.

A surprising result, however, was the lack of differences between failures and closures with respect to funding, age and size. Although we expected a significant funding effect in particular because of the fact that the sample dealt with micro–enterprises, which tend to be resource poor, funding was not a significant determinant of failure of closure. Neither were size and age, even though it was expected that older, larger firms would be more likely to close. Further research is clearly needed to elucidate the role that firm characteristics and most important, owner intentions play in determining the difference between firm closure and failure.

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