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The Reasons and Symptoms of Failure in SME

Abstract

In analyzing the sources and processes of failure, one can see a certain pattern. Namely, management does not notice the critical situation in time, which due to delayed or incompetently carried out repair actions, ends in company collapse. Development thresholds are occurring in the process of the growth and development of the company. They are often tied with crisis in the company. Their occurrence is preceded with symptoms of future crises in many cases. The analysis and understanding of these symptoms by entrepreneurs may help reduce the number of crises in companies of the SME sector and unintentional economic failure.

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Notes

  1. For example, theories like the liability of smallness (Hannan and Freeman 1984; Sutton 1997) and the liability of newness (Stinchombe 1965, quoted in Thornhill and Amit 2003). The company’s age or size in itself cannot be a direct reason of the future failure, it may, however, point to the areas one should focus on during the analysis of reasons for failure.

  2. These studies were conducted in the project financed by the Ministry of Science and Higher Education “Symptoms of failurel of a small business. Socio-economic implications. Prevention policy”. The aim of the survey was to collect opinions of entrepreneurs on the causes and symptoms of the collapse of small businesses in Poland. Questionnaire studies were conducted in 2008 in 314 small businesses located throughout the country. Among the surveyed companies dominated micro-firms (0–9 employees) 74 percent of the surveyed population and entrepreneurs who had no previous experience of running a business and this is their first business - 69.7 percent of responses. Analyzing the structure of the companies due to the economic sector it was as follows: 36.9 percent of the companies resulted in productive activities, 30.3 percent - the trade, and 32.8 percent the services.

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Correspondence to Jaroslaw Ropega.

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Ropega, J. The Reasons and Symptoms of Failure in SME. Int Adv Econ Res 17, 476–483 (2011). https://doi.org/10.1007/s11294-011-9316-1

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  • DOI: https://doi.org/10.1007/s11294-011-9316-1

Keywords

  • SMEs
  • Business failure
  • Reasons of failure
  • Symptoms of failure

JEL

  • D22
  • G33
  • L26