An empirical study on the causes of business failure in Iranian context

Abstract

Business discontinuation is an important feature of dynamic economies, and entries and exits of businesses are closely connected. A majority of entrepreneurship literature have focused on successful ventures, therefore, little is known about why ventures fail. Previous studies showed significant inter-country differences in SME failure rates, while most researches on business failure have been conducted in developed countries, and there is limited knowledge on the causes of business failure in other countries with different economical, political, social, and cultural conditions. As entrepreneurship is a newly developed phenomenon in Iran, considering the economical, social, and cultural conditions of the country, analysis of the entrepreneurship process, and the causes of failure and success, would provide critical information for individual entrepreneurs, venture financiers, and government policy-makers. The purpose of the present study is to identify the main causes of business failure based on an empirical study in Iran. This empirical study on the sample of failed business-owners/managers pointed out that the main causes of business failure are due to lack of good management, no support from banks and financial institutions, inadequate economic sphere, and insufficient governmental policies. In addition, this study indicates differences in some causes of business failure influenced by gender and business sector.