IDEAS home Printed from https://ideas.repec.org/a/kap/sbusec/v21y2003i1d10.1023_a1024433630958.html

Redefining Business Success: Distinguishing Between Closure and Failure

Author

Listed:
  • Brian Headd

    (U.S. Small Business Administration)

Abstract

New firms are believed to have high closure rates and these closures are believed to be failures, but two U.S. Census Bureau data sources illustrate that these assumptions may not be justified. The Business Information Tracking Series (BITS) showed that about half of new employer firms survive beyond four years and the Characteristics of Business Owners (CBO) showed that about a third of closed businesses were successful at closure. The CBO also made it possible to compare results of models of business survival and business success, but because of non-response bias logit models were used. Similar to previous studies, firms having more resources – that were larger, with better financing and having employees – were found to have better chances of survival. Factors that were characteristic of closure – such as having no start-up capital and having a relatively young owner – were also common in businesses considered successful at closure. Hence, few defining factors can be isolated leading to true failures. The significant proportion of businesses that closed while successful calls into question the use of "business closure" as a meaningful measure of business outcome. It appears that many owners may have executed a planned exit strategy, closed a business without excess debt, sold a viable business, or retired from the work force. It is also worth noting that such inborn factors as race and gender played negligible roles in determining survivability and success at closure.

Suggested Citation

  • Brian Headd, 2003. "Redefining Business Success: Distinguishing Between Closure and Failure," Small Business Economics, Springer, vol. 21(1), pages 51-61, August.
    • Handle: RePEc:kap:sbusec:v:21:y:2003:i:1:d:10.1023_a:1024433630958
    DOI: 10.1023/A:1024433630958
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1023/A:1024433630958
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1023/A:1024433630958?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Everett, Jim & Watson, John, 1998. "Small Business Failure and External Risk Factors," Small Business Economics, Springer, vol. 11(4), pages 371-390, December.
    2. Alicia Robb, 1999. "New Data For Dynamic Analysis: The Longitudinal Establishment And Enterprise Microdata (Leem) File," Working Papers 99-18, Center for Economic Studies, U.S. Census Bureau.
    3. Bates, Timothy, 1990. "Entrepreneur Human Capital Inputs and Small Business Longevity," The Review of Economics and Statistics, MIT Press, vol. 72(4), pages 551-559, November.
    4. Thomas Astebro & Irwin bernhardt, 1999. "Bank Loans as Predictors of Small Business Start-Up Survival," Working Papers 99-4, Center for Economic Studies, U.S. Census Bureau.
    5. Holmes, Thomas J & Schmitz, James A, Jr, 1996. "Nonresponse Bias and Business Turnover Rates: The Case of the Characteristics of Business Owners Survey," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(2), pages 231-241, April.
    6. Brian Headd, 1999. "The Characteristics of Business Owners Database, 1992," Working Papers 99-8, Center for Economic Studies, U.S. Census Bureau.
    7. Audretsch, David B & Mahmood, Talat, 1995. "New Firm Survival: New Results Using a Hazard Function," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 97-103, February.
    8. Holmes, Thomas J & Schmitz, James A, Jr, 1996. "Managerial Tenure, Business Age, and Small Business Turnover," Journal of Labor Economics, University of Chicago Press, vol. 14(1), pages 79-99, January.
    9. Brian Headd, 2001. "Business Success: Factors Leading to Surviving and Closing Successfully," Working Papers 01-01, Center for Economic Studies, U.S. Census Bureau.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rubi, Carlos Antonio Zuniga, 2024. "An Analysis of the One Village One Product (OVOP) Movement Effects on the Performance of Microenterprises: A Case Study in Cantarranas Village, Honduras," Thesis Commons a6cgy_v1, Center for Open Science.
    2. Hongxin Wang & Wenqing Wu & Chenjian Zhang, 2025. "Bouncing back from failure: Digital technology capability, entrepreneurial alertness, and reentry intention," Asia Pacific Journal of Management, Springer, vol. 42(1), pages 197-232, March.
    3. Asif Iqbal & Mahani Binti Mohammad Abdu Shakur & Sharizal Bin Hashim & Muhammad Asif, 2025. "Entrepreneurial learning from failure: a systematic review and bibliometric analysis on its theoretical foundations, antecedents, outcomes, and an agenda for future research," Quality & Quantity: International Journal of Methodology, Springer, vol. 59(2), pages 721-765, April.
    4. Francesca Sanguineti & Antonio Majocchi & Christian Lechner, 2025. "From one to many: education, diversity, and international experience in habitual vs. one-time founders," Small Business Economics, Springer, vol. 64(4), pages 1929-1951, April.
    5. Sumaya Islam, 2026. "Survival Of The Greenest? Life Cycles Of Green And Non-Green Start-Ups In Germany," Working Papers Dissertations 167, Paderborn University, Faculty of Business Administration and Economics.
    6. Li, Yisheng & Zadehnoori, Iman & Jowhar, Ahmad & Wise, Sean & Laplume, Andre & Zihayat, Morteza, 2024. "Learning from Yesterday: Predicting early-stage startup success for accelerators through content and cohort dynamics," Journal of Business Venturing Insights, Elsevier, vol. 22(C).
    7. Maria Undine Kottwitz & Nathalie Daibel & Kathleen Otto, 2025. "Being Pushed or Pulled? The Role of (In)voluntariness of Solo Self-Employed Individuals’ Career Path in Self-Fulfillment or Precariousness," Administrative Sciences, MDPI, vol. 15(5), pages 1-27, April.
    8. Giovanna Campopiano & Valerio Lo Monaco & Tommaso Minola & Silvio Vismara, 2026. "Survival of family start-ups seeking equity crowdfunding: family nuances in entrepreneurial teams," Small Business Economics, Springer, vol. 66(1), pages 1-25, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brian Headd, 2001. "Business Success: Factors Leading to Surviving and Closing Successfully," Working Papers 01-01, Center for Economic Studies, U.S. Census Bureau.
    2. Metzger, Georg, 2007. "Personal Experience: A Most Vicious and Limited Circle!? On the Role of Entrepreneurial Experience for Firm Survival," ZEW Discussion Papers 07-046 [rev.], ZEW - Leibniz Centre for European Economic Research.
    3. Brian Headd, 1999. "The Characteristics of Business Owners Database, 1992," Working Papers 99-8, Center for Economic Studies, U.S. Census Bureau.
    4. Ashish Arora & Anand Nandkumar, 2011. "Cash-Out or Flameout! Opportunity Cost and Entrepreneurial Strategy: Theory, and Evidence from the Information Security Industry," Management Science, INFORMS, vol. 57(10), pages 1844-1860, October.
    5. Hsu, David H., 2007. "Experienced entrepreneurial founders, organizational capital, and venture capital funding," Research Policy, Elsevier, vol. 36(5), pages 722-741, June.
    6. Xi, Guoqian & Block, Jörn & Lasch, Frank & Robert, Frank & Thurik, Roy, 2017. "How Does Firm Survival Differ between Business Takeovers and New Venture Start-ups?," IZA Discussion Papers 11155, IZA Network @ LISER.
    7. Ornella Wanda Maietta & Fernanda Mazzotta, 2018. "Firm Survival and Innovation: Knowledge Context Matters!," CSEF Working Papers 496, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    8. Niklas Elert, 2014. "What determines entry? Evidence from Sweden," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 55-92, August.
    9. Faustino Prieto & Jos'e Mar'ia Sarabia & Enrique Calder'in-Ojeda, 2020. "The risk of death in newborn businesses during the first years in market," Papers 2011.11776, arXiv.org.
    10. Francine Lafontaine & Marek Zapletal & Xu Zhang, 2019. "Brighter prospects? Assessing the franchise advantage using census data," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 28(2), pages 175-197, April.
    11. Bruna, Maria Giuseppina & Nicolò, Domenico, 2020. "Corporate reputation and social sustainability in the early stages of start-ups: A theoretical model to match stakeholders' expectations through corporate social commitment," Finance Research Letters, Elsevier, vol. 35(C).
    12. Masatoshi Kato & Koichiro Onishi & Yuji Honjo, 2022. "Does patenting always help new firm survival? Understanding heterogeneity among exit routes," Small Business Economics, Springer, vol. 59(2), pages 449-475, August.
    13. Broström, Anders & Baltzopoulos, Apostolos, 2013. "Higher education experiences and new venture performance," Working Paper Series in Economics and Institutions of Innovation 321, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    14. Guimarães Barbosa, Evaldo, 2016. "External determinants of small business survival – The overwhelming impact of GDP and other environmental factors and a new proposed framework," MPRA Paper 73346, University Library of Munich, Germany.
    15. Alessandro Arrighetti & Marco Vivarelli, 1999. "The Role of Innovation in the Postentry Performance of New Small Firms: Evidence from Italy," Southern Economic Journal, John Wiley & Sons, vol. 65(4), pages 927-939, April.
    16. Key, Nigel D. & Roberts, Michael J., 2005. "Do Government Payments Influence Farm Business Survival?," 2005 Annual meeting, July 24-27, Providence, RI 19248, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Masatoshi Kato & Koichiro Onishi & Yuji Honjo, 2017. "Does patenting always help new-firm survival?," Discussion Paper Series 159, School of Economics, Kwansei Gakuin University, revised May 2017.
    18. Maria Cristina Arcuri & Ivan Russo & Gino Gandolfi, 2025. "Productivity of innovation: the effect of innovativeness on start-up survival," The Journal of Technology Transfer, Springer, vol. 50(3), pages 1111-1169, June.
    19. Robert W. Fairlie & Alicia Robb, 2007. "Families, Human Capital, and Small Business: Evidence from the Characteristics of Business Owners Survey," ILR Review, Cornell University, ILR School, vol. 60(2), pages 225-245, January.
    20. Francesco Quatraro & Marco Vivarelli, 2015. "Drivers of Entrepreneurship and Post-entry Performance of Newborn Firms in Developing Countries," The World Bank Research Observer, World Bank, vol. 30(2), pages 277-305.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:sbusec:v:21:y:2003:i:1:d:10.1023_a:1024433630958. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.