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

Abstract

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.

Introduction

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

Methodology

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

Education Under First Secondary- Technician BA Total

Elementary Secondary Diploma
BS

Failure - 2 13 13 2 30

Successful 1 1 12 4 - 18

Table 9: Employees age of small business

Age T0 18 18-40 41-60 Above 60 Total

years

Failure - 18 11 1 30

Successful - 8 10 - 18

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 mean Mean Rank of
Indicators
firms Successful firms

9 1.87 General ability of Small 2.20 9

Business Managers

6 3.29 Conceptual skills 3.63 3

8 2.97 Human relation skills 3.47 5

1 3.86 Technical skills 3.94 1

7 3.18 Human resources development 3.84 2

2 3.77 Financial situation 3.54 4

3 3.52 Planning and organizational 3.26 8

4 Economic & infrastructure 3.35 7

3.50
factors

5 3.30 Informal factors 2.37 6

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.

Notes
1. Faculty of education and psychology, University of Shahid Chamran-Ahvaz, Iran- ymehr@hotmail.com

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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