Failure processes of young manufacturing micro firms in Europe

Abstract

Purpose The purpose of this paper is to find out which different failure processes exist among the young manufacturing micro firms, and whether the representation of those processes differs first, in European countries, and second, among exporting and non-exporting firms. Design/methodology/approach The study is based on financial data of 1,216 manufacturing micro firms from European countries. Failure processes have been detected with a two stage-method: by extracting latent dimensions from financial variables with factor analysis, and then, by clustering the established factor scores. Findings With firms’ age, the number of different failure processes reduces from four to two. Strong evidence was found about the dominance of different failure processes in different countries for most firm age groups. Failure processes are not strongly associated with (non-)exporting. Originality/value This paper is the first one determining young manufacturing micro firms’ failure processes and comparing the representation of those processes in different firm subsets, either based on their country of origin or (non-)exporting behavior. Moreover, previous studies have not encompassed specific sectors, young or very small firms.