Analysis of young, small firms that have closed: delineating successful from unsuccessful closures

This study of small businesses created between 1989 and 1992, and then closed down between 1993 and 1996, reveals that owners often described their firms as “successful” when the closure decision was made. Decisions to discontinue operations of young firms are shaped by intertwined factors including opportunity costs, switching costs, and noneconomic considerations. Empirical investigation is undertaken to explain the seeming paradox of successful small-business closure. Alternative opportunities are identified as a key reason for choosing to discontinue successful firms: If something more attractive comes along, the owner may close down.