An interest in the history of global markets and the management of small businesses prompted me to study HolmesÆ and HaswellÆs article, ôEstimating the Small Business Failure Rate: A Reappraisalö (1989, p. 68). These researchers were interested in discovering the causes of the inordinately high small business failure rates in Australia, a subject that had been studied previously by other researchers but not adequately explained. Holmes and Haswell broke down the problem into several issues: arriving at a meaningful failure rate, determining whether one studyÆs failure rate is more relevant than a conflicting one of another study, and deciding whether the failure rate itself is a useful figure (Holmes & Haswell 1989). They proceeded by examining the rate of failure of small businesses and performed a study of closures among manufacturing firms. Their work and that of a number of research studies cited in the article turned up conflicting answers but also succeeded in identifying some factors operative in the small business failure problem.
The conflicts found in the study included differences in failure rate estimates and were due to differences in the definition of ôfailureö used as well as the normal fluctuation of failure rates. In addition, the criteria for determining what circumstances should be presumed to prevail when a business fails differed widely. The authors quote Berryman, who suggests specific earnings, solvency, bankruptcy, and loss-cutting criteria that can be used as a benchmark for identifying a legitimate business ôfailureö (Holmes & Haswell 1989, p. 68). The authors also cited the Peacock study of legal failures in South Australia, which involved obtaining four types of legal records: files on court liquidations, records relating to both membersÆ and creditorsÆ voluntary liquidations, and reports of the bankruptcy court.
One of the most notable studies discussed was that of the high-profile ...