Towards a Taxonomy of Explanatory Failure Patterns for Small Firms: A Quantitative Research Analysis

Whereas it is obvious that the failure process can vary from one firm to another (Argenti, 1976; D’Aveni, 1989; Laitinen, 1991), to date few researchers have worked on the detection of different explanatory failure patterns. In addition, none of the reviewed research really focuses on small firms while their failure is important and particular (Julien, 2005). Considering these observations and on the basis of two complementary statistical analyses (Thiétart, 2003), this article identifies, among a sample of 208 small Belgian distressed firms, a taxonomy of five explanatory business failure patterns. That is, it distinguishes five homogeneous groups of small firms on the basis of the reasons for their failure. As the detection of the fundamental explanatory failure factors is the basis of failure prevention (Argenti, 1976), the identification of these patterns is of crucial importance for a better understanding and prevention of this phenomenon.