LITERATURE SURVEY
2.1. FAILURE LITERATURE
2.1.1. The theoretical literature on failure
Several papers have been published in recent years on small business failure e.g. Storey, D. (1994) and Cressy, R. (1999) that have sought empirical explanations for failure, particularly at the micro-economic level. Such research has investigated the role of both human and financial capital in this process. These papers offer ‘static’ models of survival and do not explicitly address the issue of learning by the owner-manager over time. Jovanovic (1982), cited in Cressy (1999) developed a model in which this occurs. Business is ‘a learning experiment’ in which the entrepreneur learns about his/her fixed level of entrepreneurial skills over time. However, there is no possibility of learning by doing here: the ability to improve one’s skills by rectifying mistakes, finding better ways of doing things, and so on . Furthermore, the Jovanovic model assumes entrepreneurs are ‘one-shot’: they are in business only once. In practice, however, many entrepreneurs are serial owners: they have managed previous businesses. Accordingly, there still remains the interesting research question of whether SMEs fail primarily because they have insufficient financial and human capital to survive and grow, or because their proprietors fail to learn from the experiences of earlier failed business proprietors. One way of approaching this issue would be to conduct a ‘post-mortem’ from the owner-manager’s perspective to discover how much learning actually occurred. This is exactly what this research seeks to provide: a dataset that has provided some rich empirical insights into the phenomenon of SME failure.
2.1.2. The official statistics ...