Toward a better comprehension of external environment factors and life cycle stages importance on SME failure in Brazil

Abstract

Although importance of small and medium-sized enterprises (SME) is relatively well established in the literature, little research exists on life cycle stage at the time of SME failure or closure. This exploratory research builds a comprehensive description of SME mortality factors related to the external environment to analyse the changing importance of these factors throughout the SME’s organization life cycle stages (OLC). Seven case studies are used to develop a more complete understanding of the relationship between external environment and mortality factors. Data were collected through interviews and analysed based on inductive content analysis technique. The results indicate that failure SME did not adequately assimilate nine main factors: non-payment of the clients, competition with big business, seasonality of sells during the year, minimum amount of purchase required by suppliers, tributary load, government economic plans, national economy crisis, and headquarter/office robbery and asymmetric relationship with the franchisor. Regarding SME’s OLC, environmental factors’ relevance changed throughout the SME life cycle. Additional result suggests that exists more stages than discussed in the literature, reported by sample SME owner-managers studied.