SME Performance

SME Performance

Separating Myth from Reality

John Watson

The performance of Small and Medium-sized Enterprises (SMEs) has been a subject of continual interest to both researchers and practitioners. This enlightening book investigates the pitfalls which have affected the assessment of SME performance in much of the past research.

Chapter 4: Failure Rates

John Watson

Subjects: business and management, entrepreneurship, economics and finance, international accounting


INTRODUCTION In this chapter I aim to dispel the myth that female-owned SMEs are less likely to survive (more likely to close) than male-owned SMEs. Carter, Williams and Reynolds (1997) surveyed a sample of 203 retail firms from two midwestern states of America in 1986 and then again in 1992. They found that 34% of women-owned businesses but only 22% of men-owned businesses ceased operations over the six-year period of their study. Boden and Nucci (2000), in a large study of US sole proprietorships in the retail and service industries that commenced operations in two different time periods, found that the mean survival rate for male-owned businesses was 4–6% higher than for female-owned businesses. The findings of these two studies suggest that female-owned retail and service businesses have higher odds of closure than those owned by males. However, Cooper et al. (1994) analysed a longitudinal study of 1053 new ventures (representative of all industry sectors and geographical regions) in an attempt to predict the performance of new ventures based on factors that could be observed at the time of start-up. Indicators of initial human and financial capital were examined to determine how they affected the probability of three possible performance outcomes: failure, marginal survival or high growth. Cooper et al. (1994) argued that general human capital (represented by the entrepreneur’s education, gender and race) might reflect the extent to which the entrepreneur has had the opportunity to develop relevant skills and contacts. The results presented by Cooper et al....

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