The results from our data indicate that there are significant differences between the characteristics of closings and failures. The results also indicate that one of the main reasons for closing the firm is that the entrepreneur found a better paying job. This is consistent with what Goffee & Scase (1983) have argued about the reasons why firms get started in the first place.
They state, "the positive role of proprietorship relies on the idea that in the capitalist system, members of economically and socially deprived groups can escape deprivation through business ownership, which provides opportunities for self determination through owning and controlling resources, and through an increase ability to flexibly interface work and domestic life." Under the existing paradigm, the fact that the entrepreneur closed his/her business for a better opportunity would have been classified as a failure. When in fact, the business has not failed but fulfilled its purpose, and the entrepreneur has moved on to other activities which better suit his/her particular needs at the time.
This study has questioned traditional approaches of analysing firm failures. The paper has explained the characteristics of business disappearances. Disappearances have been a black box in entrepreneurship research because of the obvious problems of collecting data for closed firms. The nature of the data collection in this study, both census and interview, allow for a detailed examination of the phenomena of firm disappearance. Further, we have acknowledged that owner intentions play an important part of firm outcome.
Finally, this study has redefined the term firm failure and reclassified several traditional definitions of failure. Some of the firms which under the old definition were considered failures are now to be considered possible successes. Particularly strong is the finding that small firms might close because the owner found a better job. We found that older, larger firms tend to close rather than fail and that owners of closed firms were more likely to start other firms or be employed elsewhere. The owners of the failed firms did not find these same opportunities and found less opportunity available.
This conclusion follows the efficiencywage theory for LDCs very closely. Within the context of a LDC if the firm owner received sufficient training and skill acquisition to pursue a better job, the firm might be considered a success, even though it might have disappeared. The reasoning is that a) the small firm contributed to the overall economic growth of the country and b) the enterprise served as a steppingstone to the achievement of the personal objectives of the owners. However, these conclusions make sense in the context of LDCs and of limited opportunities for the entrepreneurs. As it has been argued earlier, microenterprise creation in LDCs might be a way of escaping unemployment, and as a way of gaining training and expertise. It is important to examine whether these arguments would hold in the context of developed countries. Future search on that point is clearly needed.
It has been argued that entrepreneurship and small businesses are critical to the continued economic development in the U.S. and globally (Hitt & Bartkus, 1997). Data indicates that There were approximately 1.5 million new businesses created during the 1980s in the U.S. The arena of policy making within lesser developed countries (LCDs), has recognized the importance of micro and small enterprises (MSEs) to economic development for the past two decades (McPherson, 1996). However, despite the growing recognition of the importance of MSEs, there was no widespread interest in the potential of the MSE in the 1950s and 1960s as development economists advocated large scale, capitalintensive, investment (McPherson, 1996). In other words, MSEs in developing countries had been either directly or indirectly discouraged and discounted by their governments. Since the 1970s this trend has reversed itself. One explanation is that an evergrowing number of economic scholars and policy makers have begun to examine the possibilities of this sector as an engine of growth (McPherson, 1996). This research contributes to the analysis of MSE by examining the unique characteristics of MSE disappearance in LDCs.
The discussion of small enterprises has been praised by some as a training ground for entrepreneurs and as an experimental arena for the development of intermediate technology which may be both efficient and capital saving. Although the significance and importance of SSE to development is indisputable, it is only recently that an organized effort has been devoted to their support. Very limited information and studies are available on the status of SSEs in general. One of the main reasons for this deficiency is the non existence of an organization, syndicate, institution, or association that would represent small scale enterprises at large. Additionally, the limited information on SSEs highlights the need to develop an appropriate data base which would include the cooperation of both government and nongovernment sources.
Creating new enterprises, especially among the poor, requires different approaches compared with financing the growth of existing businesses. New entrepreneurs invariable lack the business acumen and enterprise development skills possessed by more experienced business people. They require encouragement, customized training, and technical assistance to develop their initiative to the point where they can hold their own in a competitive environment.
In the last few decades economic growth has been characterized by numerous and interesting new developments, as well as the rediscovery of old, though somewhat forgotten insights. Rapidly changing global environments and the need for research into economic development which is not stagnate, have led to a recent rediscovery of Joseph Schumpeters works. Schumpeter (1934) argued that the value of various market structures cannot be assessed by employing a static view of competition. He further asserted that the essential point in dealing with capitalism is that it is an evolutionary process. The fundamental impulse that sets and keeps the capitalist engine in motion comes from new innovations, whether it is in the form of new products, new markets, or new ways of organizing. Schumpeters work on economic development coincides with the new views of the World Bank. The World Bank is now positing that supporting the MSE sector may serve as an entrepreneurial "seed bed," with entrepreneurs gaining the training and knowledge with which to run larger industries (McPherson, 1996). Such a seed bed might be especially important given the role of entrepreneurship in economic development (Kilby, 1971).
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Last Updated 03/19/98