Business failures in the construction industry


Arditi D., KÖKSAL IŞIKKAYA A. , Kale S.

Engineering, Construction and Architectural Management, vol.7, no.2, pp.120-132, 2000 (Journal Indexed in SCI Expanded) identifier

  • Publication Type: Article / Review
  • Volume: 7 Issue: 2
  • Publication Date: 2000
  • Doi Number: 10.1108/eb021137
  • Journal Name: Engineering, Construction and Architectural Management
  • Journal Indexes: Science Citation Index Expanded, Social Sciences Citation Index, Scopus, ABI/INFORM, Aerospace Database, Business Source Elite, Business Source Premier, Communication Abstracts, Compendex, ICONDA Bibliographic, Index Islamicus, INSPEC, Metadex, Civil Engineering Abstracts
  • Page Numbers: pp.120-132

Abstract

The objective of the research presented in this paper is to explore the factors associated with company failures in the context of the construction industry. To that end, the four quadrants of an ‘environment/response’ matrix developed by Boyle & Desai (1991. Journal of Small Business Management, 29, 33–42) are populated with Dun and Bradstreet's US business failure data for the construction industry. The study indicates that budgetary and macroeconomic issues represent 83% of the reasons for construction company failures. This implies that firms that take vigorous administrative measures to address budgeting issues and that react promptly to economic conditions by implementing appropriate strategic policies should be able to avoid failure. On the other hand, issues of adaptability to market conditions and business issues appear to have limited effects on company survivability (6% of the reasons for failure). This implies that administrative measures to fend off internal conflicts that originate for reasons beyond management's control and long-term strategic decisions to regulate the firm's adaptation to market conditions can also help to prevent failure. An ‘input/output’ model appears to explain the business failure phenomenon better than the ‘environment/response’ one. © 2000, MCB UP Limited