Factors influencing survival of business ventures in an underdeveloped economy: the case of Yemen

This study presents an empirical investigation of the factors that influence the performance of small and medium enterprises (SMEs) in Yemen being an underdeveloped economy; with the help of primary data drawn from 394 enterprises in two cities of Yemen. The data collected is randomly split into two sub datasets (50% each), exploratory factor analysis is applied on the first sub dataset, and CFA and SEM tools are applied on the other sub set of data to test the relationship and effect across variables. The model presented in the study fits the data well in the Yemeni context, and exhibits the significance of legal factors, temporary factors, and managerial factors on the performance of SMEs; while, financial factors, infrastructure factors and marketing factors are found insignificant in affecting SMEs' performance. The findings of this study add to the scant literature pertaining to SMEs and their performance in least developed economies in the Middle East - Yemen in particular. Further, the proposed model would be of benefit to policy-makers, practitioners, development partners and SMEs owners and managers from perspectives of identifying the characteristics of a conducive business environment by measuring the determinants of the survival/failure of the business in such environment.