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A study of factors related to successful and failure of entrepreneurs of small industrial business with emphasis on their level of education and training

Yadollah Mehralizadeh (PhD)(1) & Sid Hossain Sajady (PhD)(2)

Sponsored By: Faculty of Education & Psychology. University of Shahid Chamran, Khozestan, Ahvaz- IRAN

Paper presented at the European Conference on Educational Research, University College Dublin, 7-10 September 2005


This paper examines the determinants of business start-up , long and short-term success and failure of small businesses with emphasis on their education and training. Entrepreneurs and small firm success and failure have been the subject of extensive research. It is important to understand the external, internal and motivational factors responsible for business start-up, the barriers faced during the initial and continuous stages of trading and the advice and assistance available to entrepreneurs. This paper is aiming in exploring and explaining the main factors are related to successful and failure of entrepreneurs in small industrial business in ahvaz city(3). Based on a random sampling 51 enterprisers marked as successful and failures are selected. The data collected based on a triangulation method (interview, questionnaire and observation). The results show that:

A- from the failure entrepreneurs point of view the following issues were important effects on their weak performance and failure their business: weak managing technical skills, financial issues, planning and organizing of their business, economic issues, informal issues, weak managing conceptual skills, personnel skills, education and low training, and weak human relation.

B- from the successful entrepreneurs point of view the following issues were important effects on their high performance in their business: suitable managing technical skills, selecting appropriate personnel with relevant skills, education and paying more attention to personnel training, application of management conceptual skills, financial issues, better human relation, recognize the economic situation, planning and organizing of their business and informal issues.


Small businesses can be a vehicle for both Schumpeterian entrepreneurs introducing new products and processes that change the industry and for people who simply run and own a business for a living (Wennekers and Thurik, 1999). During the first decades of the last century, small businesses were both a vehicle for entrepreneurship and a source of employment and income. This is the era in which Schumpeter (1912) conceived his Theory of Economic Development. Here Schumpeter emphasizes the role of the entrepreneur as prime cause of economic development. Mehralizadeh (1999), Acs and Audretsch (1990) and Carlsson (1992) provide evidence concerning manufacturing industries in countries in varying stages of economic development. Mehralizadeh (1999) and Lauder and Brown (1996) in their models advance three explanations and waves for the shift toward smallness and flexibility. The first wave is related to Fordist production (Mass production) deals with fundamental changes in the world economy from the 1940s on-wards. Second wave is started since 1970 called neo-Fordist management system, which due to the changes relate to the intensification of global competition, the increase in the degree of uncertainty and the growth in market fragmentation. The third wave is Post-Fordist system of management, which deals with changes in the character of technological progress, system of work and human resource development. Study these waves shows that flexible automation has various effects resulting in a shift from large to smaller firms. Also Piore and Sable (1984) and Thurik, R, and Weneekers, S (2001) argues that the instability of markets in the 1970s resulted in the demise of mass production and promoted flexible specialization. This fundamental change in the path of technological development led to the occurrence of vast diseconomies of scale. Post-Fordist system of management is marked with entrperunres. Entrepreneurship and therefore "the entrepreneur", is at the core of what makes an enterprise succeeds, whether you call it an entrepreneurial firm, a small business, a family business, a home-based business, or a new business.

Over the past two decades there has been a mass of research which has attempt to discover the difficulties of start-up planning and existing small business. Some of them focused on problems of new entrepreneurs and other have concentrated on exiting entrepreneurs (Mirry, 1998; Mintzberg, 1994; Schwenk & Sharder, 1993;;Covin, & Slevin,1991;Stanworth, 1991; Sexton & Bowman-Upton, 1991; Ahmadpour, 1990; Sharder, Mulford & Blackburn, 1989;Bracker and Pearson,1986; Miller,1983). Some of the researches have addressed successful entrepreneurs but others looked at the failure small business managers. All these studies were addressing if there are any clear characteristics, which distinguish small business barriers to find out which one is more important for policy makers.

After all these studies still the main question remain that why some of the small industrial business is successful but other is failed. Despite the growing numbers of small firms in the Iran and Ahvaz city the share of small firms in the Iran’s economic business has been in decline and a matter of concerns. This situation has caused great concern, as a productive economy is reliant on the birth of substantial numbers of new enterprises and the growth of such firms. The importance of this question is more important due to the government determined that during the third five year social and economic development planning move toward more small business and privatization of economy in industrial part. Establishment of small business also provides more job opportunities for huge army of unemployed young people in Iran. Therefore results of this research will help the policy make in Iran and other countries with the same economic situation to develop reasonable planning to get advantage of development of small business.

Theoretical framework of study

Although there are a huge amount of research in relation to entrepreneurs but review the literature and most of the work done in this respect revealed that the authors focused on the different aspects of entrepreneurs success and failure. Generally speaking, all entrepreneurs are when developing a business are faces with three vital stages: a)getting idea of business, b)start-up activity and c) activate the business. In each stages they are struggle with different issues. To get a better idea of the relationship among these issues we classified them as 6 main issues and a numbers of variables.

Creating a new business is a process fraught with difficulty and failure and many businesses fail in the first twelve months of trading (Reynolds & Miller, 1992, Sullivan et al 1998; Lussier, Robert N. 1996). Previous research has identified a number of possible influences on the success of new small businesses, including the effects of opening size on growth, the entry process, customers and innovation. For example, Johnson, Kattuman and Conway (1996) found that business size plays a key role in the growth rate of very small businesses, with micro businesses experiencing the highest rates of growth. Differences have also been found between those who set-up from scratch and those who purchase existing businesses, those who rely on one large customer as opposed to those who develop relationships with a variety of small customers, and those who pursue a niche market (Reid, 1993; Sullivan et al 1998; Johnson, Kattuman & Conway, 1996). It should be noted that whilst innovation can provide new market opportunities, innovative businesses often face rapid growth, which can be disastrous if not managed correctly.

While a listing of reasons for small business failures would at first seem lengthy, according to Clark, S. (1997) of the Puget Sound Business Journal, the majority of the causes can be condensed into the three critical issues, namely; Money, Management and Marketing. But here we addressed issues, which are more frequently studied by previous researchers in different economic section and countries.

Internal factors

In the light of internal factors review of the related literature will show three main area of research, which are related to a- personal Characteristics of Small Business entrepreneurs, b- Planning and organizing business and c- financial management.

a- personal Characteristics of Small Business entrepreneurs

In spite of a number of research which has attempt to discover if there are any clear characteristics which distinguish small business owners the general conclusion appears to be that there in no simple pattern, but a complex set of interrelated factors that increase or decrease the probability that an individual will become the owner of a small business, and whether or not that business will succeed or fail.

Some studies are focused on demographic and personality Characteristics of entrepreneurs. In terms of demographics they looked at class and educational background, age and gender (Hornday, 1990). Historically, the majority of individuals who entered business did so through existing family interests (Bolton, 1971). But in the light of personality, An emerging view held by economists is that particular traits characterize the successful entrepreneur (e.g. Sullivan et al 1998; Miner, 1997; Miner 1997; Ward, 1992; Chell, Haworth & Brearley, 1991) proposes that there is "not just one kind of person who has the potential to succeed as an entrepreneur, rather there are four types": the personal achiever, the empathic salesperson, the expert idea generator, and the real manager. As the name suggests the main driving force for the personal achiever is the need to achieve, but they often have insufficient knowledge to run an organisation effectively and are likely expand their business too quickly in their pursuit of success. The psychological characteristics used to describe successful entrepreneurs have frequently included: the need for achievement, propensity for risk-taking, personal and interpersonal values and innovativeness (Low & MacMillan, 1988).

Attempts to characterize successful entrepreneurs have raised a number of issues. Brandstatter (1997) suggests that, although there are many reasons why so many new business ventures fail within the first five years, misfit of personality structure and task structure may be one of the most frequent causes of failure. Moreover, it is emotional stability and independence that foster the skills necessary for business success, especially during the initialization phase when entrepreneurs need to (a) have the courage to take risks and (b) have the flexibility and persistence to purse their goals. Nine out of ten business failures in the United States are caused by a lack of general business management skills and planning (Troy State University, 2003). According to Dun & Bradstreet statistics7, 88.7% of all business failures are due to management mistakes. The following list summarizes the 12 leading management mistakes that lead to business failures. 1) Going into business for the wrong reasons , 2) Advice from family and friends, 3) Being in the wrong place that the wrong time, 4) Entrepreneur gets worn-out and/or underestimated the time requirements, 5) Family pressure on time and money commitments, 6) Pride, 7) Lack of market awareness, 8) The entrepreneur falls in love with the product/business, 9) Lack of financial responsibility and awareness, 10) Lack of a clear focus, 11) Too much money, 12) Optimistic/Realistic/Pessimistic (quoted from Lewis A Paul, 2003).

However, Cromie and John (1983) concluded: "The skills necessary to ensure the growth and development of an enterprise may well be different from those required to conceive and launch a business." This view of the entrepreneurial process as a dynamic one is becoming more widely recognised, for example Hisrich (1990) argues that as an organisation enters a growth phase there is an increasing need for entrepreneurs to have ‘managerial skills’. The majority of new business owners set up in the industry in which they had previously been employed (Carter & Cannon, 1988; Fuller, 1994). There is also evidence that most successful small business owners previously worked in other small firms or smaller divisions of larger companies (Lussier, Robert N. 1996; Fothergill & Gudgin, 1982).

b- Planning and organizing business

What seems to be a common citation are poor planning , poor management and marketing. There are a lot of reasons given, but it is hard to actually know for sure why a business failed unless you analyzed each particular case.  good idea for a small business to succeed. Small business entrepreneurs must plan for success. This includes market research, identifying the primary audience/consumer and developing a five or ten-year plan that includes cash flow, financing and expansion concerns.Marketization involves far more than just knowing your market and what motivates it. Most businesses focus on the marketing "push," but few ever focus on the "pull," which is one of the secrets to success. 

Pre-start-up planning is "the process by which the entrepreneur, in exploiting an opportunity, creates a vision of the future and develops the necessary objectives, resources, and procedures to achieve that vision (Sullivan et al 1998; Lussier, Robert N. 1996; Sexton & Bowman-Upton, 1991, p118). It is a process that includes collecting and analyzing data, then using that knowledge to develop a business plan. Plans can range from those with the most minimal structure through to very comprehensive and detailed, long-term plans. Bracker and Pearson (1986) propose a four-level classification: (1) unstructured plans, (2) intuitive plans, (3) structured operational plans and (4) structured strategic plans. Although several studies have shown strong positive links between planning and business success (e.g. Schwenk & Sharder, 1993; Bracker, Keats & Pearson, 1988) other have found no such links or differential links between industries (e.g. Robinson & Pearce, 1983; Sharder, Mulford & Blackburn, 1989). However, although most would agree that planning can be beneficial, there is an emerging view that the value of planning is context-dependent and that its benefits may differ across contexts (Castrogiovanni, 1996; Mintzberg, 1994).

c- financial management

A chronic problem facing many small businesses is the lack of funds to establish them on a sound and stable financial footing. Initially, a business's capital may be limited to what its owners can raise from savings, mortgaging the family home or borrowing from relatives etc. Different studies observed the importance of financial issues for new and existing entrepreneurs ( Sullivan et al 1998; Lussier, Robert N. 1996; Hay and Kamshad,1994; Bevan et al,1987). In terms of financial the entrepreneurs were complaining about obtaining capital/finance , cash flow problems, a guaranteed income during the first year of activity, their low information about the tax.

External and contextual Factors

In terms of external and contextual factors it is widely recognised that successful organisations are those that best adapt to fit the opportunities and the constraints inherent in the environment in which they operate (Kalleberg & Leicht, 1991). Here some factors are more concentrated by previous researchers, namely: a-economic factors, b- government support, c- Social support d- Information factors and e- informal factors

a- Economic and infrastructure factors

The vast majority of new micro and small businesses are initialized in the localities in which their founders already live, and the chances of success are closely related to the geographical location (Sullivan et al 1998; ; Lussier, Robert N. 1996;Stanworth, 1991). In addition, in geographical areas of high large-plant-industries there tends to be a lack of suitable start-up premises for micro and small businesses. Thus, business start-up is likely to be greatest in areas which are low in large-plant-industries and which have a high small business populations already established .Also, there appears to be a number of key locality influences that have a positive impact on the development and growth of small firms (Keeble & Walker, 1994). These included previous population growth, capital availability through housing wealth, local enterprise cultures, and professional expertise. Local market demand also has a degree of influence, although this is less important in determining survival and death rates in micro and small businesses.

b- Government support and empowerment role

It is realized that small business has a greater role in economic growth. Therefore, the government should help entrepreneurs to start new business and protect them to continue the business. The government can stimulate private business development and employment growth by fostering an "enabling economic environment". This means minimum regulations; fair, broad-based taxation as low as feasible and simple for compliance; liberalized trade both domestic and external, and helping to create a financial sector with easier access to funds for all businesses. The government should also make available funds (along the lines of the social fund mentioned above), including lines of credits for small business loans to mitigate the damage to businesses and of employment losses created by policy reform and restructuring. the quality of advisory services, especially with regard to advice at start-up;  subsidies for support advice;   the availability of effective business mentors; the awareness of business support opportunities; the level of bureaucracy involved in new business development, especially with regard to the process of employment creation.  The government should act as a facilitator -- a provider of resources -- for support and advisory centers, but not as a direct provider of services. The government is also responsible for creating the physical infrastructure -- roads, power, water, transport links, telecommunications, industrial land, estates and incubators -- and basic skills training and satisfactory education at all levels. Without these, the private sector cannot flourish. It is important to recognize that the provision of some of the above facilities may be the responsibility of local or regional authorities as well as central government. The decentralization of support services and the encouragement of regional and local initiatives are desirable and usually more cost-effective ( Tawney, C and Levitsky,J.2000). A study in Russia observed that existing practices in the areas of registration, inspections, licensing, and certification are very far from the benchmarks established in the new Legislation (CEFIR and the World Bank,2002).

c- Social support

The availability of social support can be a significant factor in the ability of small business owners to cope with the barriers and difficulties they face during the initialization of a new enterprise. A lack of family support places small business owners at a serious disadvantage and this is especially destructive for those who have heavy family responsibilities, responsibilities that generally fall on women. This results in female entrepreneurs working significantly fewer hours than their male counterparts (Chay, 1993) and the effects of this on business growth can be clearly seen, with women operating smaller businesses than men (Loscocco et al, 1991)

d- Information factors

The research showed that access to information to know the market behavior, analysis the demand and supply of products and services are in high priority for small business managers. Those who have a greater understanding of the industry or market tend to have more favorable perceptions of the value of the opportunities they encounter and their ability to utilize those opportunities (Lussier, Robert N. 1996;Gatewood et al, 1995 ).

In order to develop a theoretical framework for this study we focused on some important factors. Based on the review literature, theories of Total quality management, entrepreneurs theories and also our explorative interviews with knowledgeable official staff and entrepreneurs we developed a framework. (see figure 1). In facts, same as Wilken (1979) we assume that Individuals pursuing a new business venture go through three stages of entrepreneurship, namely raising idea, start-up activities and finally, activate the business. There are many factors, which influence the formation of a new business venture and its subsequent success or failure. These include the internal factors (personalities of entrepreneurs, their motivation, efforts, taking risk, tolerance for pursuing such a venture …) and external factors ( economic & infrastructure conditions, inflation, market information, supply and demand for products and services, banks system, trade regulation, skilled personnel…)

Both the external and internal environment of the small business will effect the first idea of developing a business

a. These two main factors together with start-up activities influence the entrepreneur’s decision to initiate a business. The initialisation and first year of a new business are critical stages in determining the success or failure of a new business. In this stage entrepreneurs ability to compromise internal and external factors and better organization and structured his/her business are important.

b. If they are could make a reasonable compromising , they successfully will continue their business. Meanwhile in order to survive they are supposed to struggle hard with different external, internal and compromising activities. If they could come over the raised problems they will survive, otherwise they would go bankrupted.

Figure 1: Theoretical framework of study

The success or failure of a businesses is often dependent on overcoming a series of potential barriers, e.g. securing sufficient financial backing, adequate and appropriate guidance, and training etc. Yet in light of the substantial growth in self-employment, there has been little research into the experiences of successful and failure small businesses and many questions remain unanswered. To date there has been no systematic study of this group in the Ahvaz, which is one to the industrial and big city in the state of Khozestan in Iran.

Goals and Hypothesis of study

The preliminary study about the subject revealed that although the entrepreneurs in small industrial business in Ahvaz city are active in relatively similar environment but some of them after a while get bankrupted. This is the question why some of the entrepreneurs are successful but others are failed in continue their business. For the purposes of this research, small business was defined as independently owned and operated businesses employing fewer than 50 employees. For measuring entrepreneurs successful in business there are a numbers of methods such as:, net profit after tax reduce, amount of tax paid during the last three years, rate of productivity ( input-output ratio), current assets ratio (ratio of current assets to current debt), keep working since three years ago and active in the business, increase products, services and sale, increase business capital. In this study due to the difficulty of access to all those information and data, we use the last three indicators for measuring the performance of small business.

Paper questions and hypothesis

1-To how extent the performance of successful and failure entrepreneurs in small industrial business is related to their managerial skills?

In relation to this question three hypotheses are tested as follow:

H1-1= Human relation skills of successful entrepreneurs are higher that failure entrepreneurs

H1-2= Technical skills of successful entrepreneurs are higher that failure entrepreneurs .

H1-3= Conceptual skills of successful entrepreneurs are higher that failure entrepreneurs .

H1-4= The general abilities of successful entrepreneurs are higher than failure entrepreneurs.

2- to how extent the performance of successful and failure entrepreneurs in small industrial business is related to their human resource development indicators?

H2-1 successful entrepreneurs have better developed human resource indicators than failure entrepreneurs

3- to identify how much the performance of successful and failure entrepreneurs in small industrial business is related to their financial situations?

H3-1- successful entrepreneurs have more suitable financial situation than failure entrepreneurs

4- to identify how much the performance of successful and failure entrepreneurs in small industrial business is related to their planning and organizational issues?

H4-1- successful entrepreneurs have well organized and structured than failure entrepreneurs

5- to identify How much the performance of successful and failure entrepreneurs in small industrial business is related to their economic & infrastructure environment of business in the city of Ahvaz?

H5-1- successful entrepreneurs have better use economic & infrastructure facilities of business in the city of Ahvaz than failure entrepreneurs.

6- TO how extent the performance of successful and failure entrepreneurs in small industrial business is related to the informal issues (corruption, , bribes ….)?

H6-1 successful entrepreneurs have lower effected by informal issues than failure entrepreneurs

7- to identify the barriers encountered by entrepreneurs at the different stages of business


The methodological design of this investigative project was determined by the absence of any previous research into the experiences of small businesses, based in the Ahvaz city and khozestan province, during the initialization, start-up process and getting benefit. A quantitative and qualitative approach was used to identify the needs of such individuals, the barriers and problems they had encountered, the means by which they had overcome such difficulties, and the sources of support available to them. Based on the findings of an extensive literature review, in-depth open-ended interview questions were developed and a preliminary investigation was conducted with a random sample of small business in the Ahvaz city The findings of these in-depth open-ended interviews, in conjunction with the literature, were used to design a preliminary questionnaire and interview. A researcher based questionnaire to guide the data collection process were developed around four areas: (1) personal information of entrepreneurs , 2- employees information (sex, age, education and skills level, way of selecting employees, employees training), 3- correct situation of company ( their customers, assists, facilities, and 4- main factors effected their performances With slight variations, this set of guiding questions served as the basis for developing instruments for interviews. These guiding questions were pilot tested with a sample of 30, and further feedback was obtained from an advisory group in terms of content and wording. The modified versions for each of the instruments used to conduct interviews with various small businesses.

All small businesses are categorized in 19 group based on the International Standard Industrial Classifications of all economic activities for Iran Economy. With use of stratified random sampling we selected 140 small industrial businesses from the 1254 established small firms in three years ago (Statistics taken from Iran’s Industry Office) in the fields of Food products and beverages, Textile, Wood products, paper production, oil production, chemical products, and…which representing various contexts and levels of activities related to industry. We have done 14 semi-structured interviews with the entrepreneurs. General Director of industry and his chancellors in Khozestan state. Direct Observation also conducted to familiarize researchers with the contextual circumstances of the setting. A team of two researchers conducted all site visits. Prior to each interview, participants were informed about the purpose of their participation, the nature of the inquiry, and the intended use of the information. To stimulate rapport neither between interviewers and interviewees, and to encourage candid sharing of experiences, all participants were assured confidentiality of their input, and no identifiers of particular sites, staff, nor of any of the participants in this study is used in this report. The interview protocols served as semi structured guides, and additional probes were developed ad hoc according to the nature of the responses and particularities of the events and/or experiences described by the participants. Interviews were tape recorded with the verbal consent of the participants. At this point, personal notes were taken to describe particular characteristics and further complement the information gathered on the site. After site visits, the visiting team compared notes and exchanged observations on the characteristics of the site and events of the day to begin developing patterns in light of the questions guiding the case study design. Finally 67 questionnaires were collected but some of them were incomplete so that we chose 53 fully completed one. We put the entire questionnaire into the SPSS program and analyzed them in terms of our hypothesis.

Results and discussion

In relation to the first three hypotheses the results revealed that among the management skills (Human relation skills, Technical skills and Conceptual skills) there was a significant relation between successful and failure entrepreneurs. The results of three related hypothesis are summarized in table 1. As the table 1 shows both successful and failure entrepreneurs were agreed that weakness of technical and conceptual management skills are negatively affected the performance of their business.

Table 1: results of Hypothesis related to managerial skills of entrepreneurs and their firms performance

H1-4= The general abilities of successful entrepreneurs are higher than failure entrepreneurs.

To test this hypothesis we aggregate variables such as: education of small business managers, their major field, first job or second job, relation between their education and business activities, previous experience of managers in relation to their business. Results of t-test for independents groups revealed that there is a significant differences between successful and failure entrepreneurs .[t-test= -2.19, df= 49, sig=.05].

Table 2: results of hypothesis related to general abilities of small business managers entrepreneurs and their company performance

Table 3: Education level of Small Business Managers and their company performance

Table 4: Major field of Small Business Managers and their company performance

Table 5: results of hypothesis related to jobs of Small Business Managers and their company performance

The results of interviews say that entrepreneurs concentrated to the importance of previous experiences and technical skills for running the small business. One of the successful entrepreneurs in Electrical business mentioned that:

"… I have a long experience in doing this job. Actually, my family were involved with this business since ages ago, therefore I have a good experience of doing this business otherwise I would go bankrupted."

One of the successful entrepreneurs in the filed of food industry in relation to the factors of his success emphasized on two related factors: personal experiences in the job and getting knowledge and

Information about the market, financial management. He said that:

"… The truth is that when we bought here, we were familiar with this business and sold material to previous owners, but personally I did not have right experience of doing this job. But I put myself at risk and paid too much to previous workers to stay for a short time with my business. After a while when I get knowledge of doing business personally I take over the job".

This results are confirm the studies of Mirry (1998), Patrick Kreiser, Louis Marino, K. Mark Weaver (2003) and Covin, J.G., & Slevin, D.P. (1991).In fact, Individuals with business ownership experience believed that the obstacles to launch and continues a business could be overcome as compared to individuals without business ownership experience. Entrepreneurs personal and background characteristics such as education level, their main job, relation of their education with the company activities, previous experiences with the same business, ability to recognize market demand and regulations, consumer behaviors, and knowledgeable of the company costs and benefits are important in their management of the business.

When we consider the education background of small business mansager we recognized that majority of them have not had enough education and training in relation to entreprunership. It seems that three attributes are extremely important in entrepreneurship education: the ability to identify or recognize a market opportunity and the ability to generate a business idea, service or product that seizes that opportunity, the ability to marshal and commit resources to pursue that opportunity while facing the prospect of risk, and the ability to create an operating business organization that implements the opportunity-motivated business idea.

2- to how extent the performance of successful and failure entrepreneurs in small industrial business is related to their human resource development indicators?

H2-1 successful entrepreneurs have better developed human resource indicators than failure entrepreneurs

Level of Education among the small business managers and their emploees in case studies was another variables which has been addressed. Although employees training and education indexes are considerable to run a business we realized that there is a significant differences between successful and failure entrepreneurs in Ahvaz industry. (t-test: 2/60, df: 41, Sig: ./05). In fact, failure small business managers have less attention to development their personnel skills. Mean of education for successful small business was 3.84 and for failure small business 3.18.

Table 6: results of hypothesis related human resourse development of Small Business Managers and their company performance

A large part of being a successful entrepreneur is having the training and know-how to accomplish the venture. This ultimately relates to the overall quality of education that a country can provide for its people.

As table 7 show high percentage of the small business surveyed employed 1 to 5 person. Having a spouse or family member working in the business is fairly common in the small business sector. The survey shows this occurring in nearly 45 per cent. the businesses with family members employed full-time, part-time and even casual workers.

Table 7: Number of employees of small business in terms of their sex and work situation

Employees situation Information

Table 8: Employees level of education of small business


Under Elementary

First Secondary




















Table 9: Employees age of small business


T0 18 years



Above 60














Our data of the system of hiring and firing of small business in Ahvaz indicated that they are employing more casuals and contractors. The main reasons for hiring casuals over permanents are: varying business income and work and to reduce costs, however a real barrier to employment in the sector is the view that it is difficult to find skilled and motivated employees for small business.

This survey provides two basic messages for entrepreneurial education. First, it illustrates that there are substantial deficiencies in entrepreneurial knowledge among the small business managers and employees. Secondly, it indicates a clear recognition among these groups that true entrepreneurial education is needed

H2-1- successful entrepreneurs have more suitable financial situation than failure entrepreneurs.

There is no doubt that the continuity and successful performance somehow is related to the company asessts and capital. Financial institutions are a significant source of supporting start-up and continue capital for entrepreneurs. The results of this research indicated that in terms asessts and capital there is no significant differences between successful (n=18, mean=3.54) and failure (n=27, mean= 3.77) entrepreneurs. (t-test: /93, df: 43, Sig: ./45). In light of these findings, it is interesting to note that, both failure and successful entrepreneurs perceive access to financial support as a major barrier .

Different banks in Iran mainly provide the resources of supporting small business. The approaches taken by banks to small businesses was criticized heavily by successful and failure entrepreneurs. They believed that greater uniformity in services and rates would be of benefit to all those involved. The way in which financial institutions allocate credit and loans was also felt to be discriminatory against small businesses. Plus, the decision to lend money was taken by someone who they felt was unqualified to determine whether or not they had a potentially successful business plan.

The General Director of Khozestan industry expressed that:

"… banks couldn’t help the small business for different reasons: firstly, banks do not share themselves in the lost and gains and they only looking for their profit. This procedure brings down the risk of approaching business from the entrepreneurs and also bank system. Secondly, due to the bureaucratic processing of the entrepreneurs request, getting a loan takes a lot of time and makes the entrepreneurs disappointed."

Inability to manage cash flow effectively is one of the main reasons entrepreneurs fail, or experience great difficulties in their first year of operation.. This situation frequently arises because of external factors beyond the control of the business owner, e.g. inability to secure credit with suppliers while having to provide extensive credit for customers. The majority of cash-flow difficulties appear to arise from customers (particularly organization government) failing to settle their accounts in accordance with the agreed credit terms. This places small business owners in a very difficult situation, they cannot afford to upset their customers by continual harassment for money yet they cannot afford to allow such monies to remain outstanding. The worst offenders in terms of payment seem to be large government organizations, with the degree of difficulty in obtaining payment rising with the size of the organization. This may result from increasing bureaucracy in large companies, which delays payments simply because of the processes involved in settling accounts. However, this does not absolve them from their role in the potential destruction of many small businesses. Large organizations should not be in the business of destroying other businesses and they need to have policies in place, which protect small businesses from such treatment.

H3-1- successful entrepreneurs have well organized and structured their business than failure entrepreneurs.

As the literature revealed majority of failure small business are face with managing skills weakness which part of it is related to entrepreneurs managerial skills, and other part is belong to government roles in supporting and protecting small firms.

Testing hypothesis between the level of entrepreneurs planning and organizing of their business revealed that In terms of personal management skills, successful enterprisers have more suitable skills than failure managers (t-test: 2/30, df: 43, Sig: ./05). But in terms of government role both entrepreneurs have the same problems. (t-test: /94, df: 43, Sig: ./35). Theory very much complaining about the weak government support, advice, information, training and developing a reliable system of loan and links with the banks. Although the General director of Ahvaz industry mentioned new facility for small business owner but our sample were claimed that access to those facility is taking time and do not worth to go for that services.

H5-1- successful entrepreneurs have better use economic & infrastructure facilities of business in the city of Ahvaz than failure entrepreneurs.

Each business activate in a particular economy. If the obligation of the economy is organized it is possible to reduce the risk of bankruptcy. In this study in terms of economic facilities and indicators we looked at the labor market situation (level of market competitiveness, variety of products), balance of fiscal policies with financial needs of small business, inflation rate, raw material prices, trade regulations and changing legislation, government support, administrative controls, rational loan interest and taxes issues. We calculated a t-test for independent group and realized that there are no significant differences between successful and failed entrepreneurs. (t-test: 1/10, df: 43, Sig: ./15). Both of them mentioned the imbalances of economic & infrastructure indicators. The main barriers they very emphasized to are: changing trade regulations and legislation, high inflation rates, instability in the labor market behaviors and growing taxes and loan interests.

H6-1 successful entrepreneurs have lower effected by informal issues than failure entrepreneurs

As we our model assumed informal factors such as corruption, fraud, and illegal activities will affect performance of small business managers. Our results revealed that entrepreneurs in Ahvaz are faces with the same issues but its effects weren’t significant over the performance of successful and failure entrepreneurs. (t-test: /67, df: 43, Sig: ./55). Failure entrepreneurs were believed that their failure somehow is related to the informal forces, which wasn’t under their control. One of the failure entrepreneurs said that:

"Almost all inspectors take bribes or else it is impossible to get the documentation that the inspections have been passed."

While the successful entrepreneurs were not agree with this idea.

7- what are the barriers encountered by entrepreneurs at the different stages of business?

During our interviews we keep asking the entrepreneurs why they failed or successful? The answers of failure entrepreneurs were asserted the following issues: lack of government support, changing regulations, lack of security for investment in Ahvaz, unfair agreement and contracts which imposed by large companies particularly government industry and organization, low information, difficulties with hiring skilled personals, higher loan interests and more important the financial problems.

The successful entrepreneurs emphasized on issues such as: quality of their product, working hard (more than 12 hours daily), previous experiences, having skills in this subject, continues monitoring the progress of business, consultation with expert people, getting information from the market, analysis of market and consumers behaviors, respect and trusted customers, developing good relationship with some of the related large industry for buying and selling products, emphasizing on workers and management creativity, hiring skilled workers, and partly family financial supports.

In sum up, we could classify the reasons of difficulties of small business from the views of failure entrepreneurs as their importance consequence as follows: (see table 2). "Technical skills, Financial situation, planning and organizing, Economic & infrastructure Factors, Informal factors, Conceptual skills, Human resources development and Human relation skills"

while successful entrepreneurs emphasis that the following factors consequentely effects the small business activities in Ahvaz city as " Technical skills, Human resources development, Conceptual skills, Financial situation, Human relation skills, Economic & infrastructure factors, planning and organizing and informal factors".

Table 10: results of importance factors effects small business management in terms of their rank

Rank of failure firms




Rank of Successful firms



General ability of Small Business Managers





Conceptual skills





Human relation skills





Technical skills





Human resources development





Financial situation





Planning and organizational





Economic & infrastructure factors





Informal factors




It is interesting to note that Successful entrepreneurs persist in entrepreneurial activities because they attribute the reasons for their success to internal, stable and intentional factors, whilst attributing their setbacks to external, variable and accidental factors. This result has demonstrated that successful entrepreneurs have more attention to certain activities such as planning, networking, securing financial resources than failure entrepreneurs. This results confirm the study of Cooper, (1993); Vesper, (1990) and Gatewood et al, (1995). The reason for the failure of such businesses may result from the fact that they were started on unrealistic assumptions, that they were lacking in essential business relations, or that they were unable to mobilise or organise their resources efficiently. Successful organisations tend to be those that are best suited to the opportunities and constraints imposed by the environment in which they operate. The degree of fit achieved is heavily reliant on the skills and abilities of micro and small business owners, their personality structure and the stylize support networks available to them.

What should be done to create a better environment for small businesses in Ahvaz city?

This study has led to a number of recommendations for entrepruners and governmnet as follows:

Firstly, entrepreneurs whether start-up or exiting one, have to bear in mind they need a suitable planning of business. However, the following items should assist in the improvement of chances for success: 1- designing a business plan and evaluate it constantly in the light of their situation, 2- recognizing the market opportunities and accurate financial information about the business in a timely manner, 3- have a better knowledge of the targeted customers, suppliers and interested groups to their products and services, 4- Go into business for the right reasons, 5- collaboration with available network with other business owners in similar industries and 6-constantly become better informed of the resources that are available and investigate of funding opportunities

 Secondly, in spite of the facts this study stressed that the total size of governments in Ahvaz city matters most, but we believe the government has to play a more active and empowerment role in supporting the small business managers. governments should concentrate on their core tasks of creating sound institutions and policies and then get out of the way. Theses roles are as follows:

  1. a massive deregulation effort including a system to help prevent the imposition of wrongheaded new regulations; reductions in the size of government at all levels; and the removal of barriers to trade.

  2. improveing the situation of small business in the view of public and enterpruners

  3. providing financial resources through the selling papers

  4. providing support and advices to entrepruners in terms of IT knowldes to have access to the international market and looks for new coustomers.

  5. creating the appropriate business infrastructure - the built environment perspective and maintain facilities for small bisuness to export their products and services more smothely.

  6. released list of successful small buisiness to internal and external inversotrs

  7. monitoring collaboration between new and present small business and large industry in city of Ahvaz and create a better links and relation between them

  8. The biggest reason the Iran is not experiencing more entrepreneurism is because of a lack of education about entrepreneurial activity at all levels in the educational system. With a properly designed entrepreneurial curriculum in place in Iran’s schools, the number of entrepreneurs would increase dramatically and the economic health of the country would also increase. training and retraining programs to orientate those who have been skilled or semi-skilled workers in fields for which there are no further prospects of employment towards business creation and management according to the prospects and aptitude of the jobseekers and present employees in small business. Suitable training institutions are often in the private sector; and where possible this training should be funded by the government. However, a degree of subsidy by government is usually necessary at this stage of business.
  9. providing business mentoring;   training support for entrepreneurship in relation to system and economic analysis, finding resources, management system, accounting, new techniques of production and delivering services to customers, how to maintain the quality.

  10. Providing information: the government should focus on improving the conditions for small enterprises and leave the collection and analysis of market data to the private and nongovernmental sectors
  11. Reassessing its role in financing: the government could shift its efforts from the provision of direct financial support through government loans and subsidies to developing public-private mechanisms and specialized financial instruments
  12. Reducing administrative controls and government corruption.


1. Faculty of education and psychology, University of Shahid Chamran-Ahvaz, Iran-

2. Faculty of Economic and Social Science, University of Shahid Chamran

3. The authors wish to thank  to supported of  Entrepreneurship center of University of Shahid Chamran Ahvaz .


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