A Nonfinancial Business Success Versus Failure Prediction Model for Young Firms

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A NONFINANCIAL BUSINESS SUCCESS VERSUS FAILURE PREDICTION MODEL FOR YOUNG FIRMS* by Robert N. Lussier Prospective entrepreneurs are concerned about the chance of success for their proposed business. A success versus failure prediction model can help the prospective entrepreneur more accurately assess the probability of the proposed business s success. Success versus failure prediction research also benefits existing entrepreneurs, those who assist, train, and advise them, those who provide capital for their ventures, suppliers, and public policy makers (Altman 1983; Ballantin, Cleveland, and Koeller 1992; Cameron, Kim, and Whetten 1987; D'Aveni 1989; Dugan and Zavgren 1989; Koh and KiUough 1990; Pech and Alistair 1993; Storey, Keasey, Watson, and Wynarczyk 1987). While there has been much prior work in this area, much is left to do. As GaskiU, Van Auken, and Manning (1993) state: "There are many studies to better understand business success versus failure. However, there are many questions still to be resolved that warrant additional exploration ... previous studies do not provide a comprehensive or unified explanation for small firm failure ... *The author would like to acknowledge Dr. Frederick C. Scherr, editor of the Journal of Small Busmess Management, for his helpful input to this article. Dr. Lussier is associate professor of management and research methods and director of tiBining and development services at Springfield College, Springfield, Massachusetts. His research interests includes small business, international business, and supervision. comparisons are needed between successful and failed small business owners." Prior empirical studies of failure have concentrated almost exclusively on financial ratio data, though studies of failure usually cite managerial variables as being critical (Scherr 1989). The usefulness of ratio-based business failure

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