An empirical analysis of the exit of SMEs tendering for public works in the Japanese construction industry

Purpose – The purpose of this study is to examine what factors affect the exit of small and medium-sized enterprises (SMEs) from tendering for public works in the Japanese construction industry using the Keiei Jikou Sinsa or Keisin (the database for evaluation of construction companies in Japan). Design/methodology/approach – This study empirically analyzes SMEs’ exit using the binary logit model. For the empirical analysis, it uses the scores as well as financial and non-financial performance indicators of Keisin data. Findings – The Keisin scores (the total score and W score), financial performance indicators (cash flow from operations and capital) and non-financial performance indicators (having unemployment insurance and operating years) significantly affect SME exits. Although the Keisin data are used for bid entry qualifications of public works, they can be applied to a factor analysis of the exit of SMEs in the construction industry. Originality/value – As there exists little empirical analysis of the exit of SMEs globally, this study contributes to the research on this phenomenon.