Failure factors in small and medium-sized enterprises: qualitative study from an attributional perspective

The objective of this study is to identify factors for poor performance and failure faced by small and medium-sized enterprises (SME) and to investigate a potential bias between real causes and attribution for stranding. In order to achieve this objective, we have adopted entrepreneurial personal story explorations in eight Portuguese SME. Our research reveals that the most important factors are limited access to finance, poor market conditions, inadequate staff, and lack of institutional support, as well as co-operation and networking. Hereby, at a first glance, external factors were more often cited, but qualitative analysis revealed that internal factors are imminent and not satisfactorily recognized. Even though some owner-managers showed a certain awareness regarding their internal weaknesses, many problems such as lacking strategy and vision, low educational levels, and inadequate social capital are not sufficiently recognized. Therewith, we found a strong attribution error when SME owner-managers judge the causes of their ventures' unsuccessful performance and failure. Finally, we draw conclusions and suggestions for policymakers, small business owners, consultants, and researchers.