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AN INPUT/OUTPUT MODEL FOR BUSINESS FAILURES IN THE CONSTRUCTION INDUSTRY

ALMULA KOKSAL

Illinois Institute of Technology, Department of Civil and Architectural Engineering, Chicago, IL 60616, USA

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DAVID ARDITI

Illinois Institute of Technology, Department of Civil and Architectural Engineering, Chicago, IL 60616, USA

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https://doi.org/10.1142/S1609945104000024Cited by:13 (Source: Crossref)

Abstract

An input/output model is proposed to explain business failures in the construction industry. The proposed input/output model argues that organizational and environmental factors are the determinants of failure/survival in that they solely or jointly affect the performance of an organization, whose components in turn constitute the symptoms of failure/survival. Dun and Bradstreet's US business failure data are used in the study to populate the input/output model. The proposed input/output model is generated by two processes. In the initial process, environmental and organizational determinants (i.e. inputs) are transformed into performance symptoms (i.e. outputs). According to the results of the study, environmental factors account for 60.7% and organizational factors for the remaining 39.3% of all the determinants of failure. In the final process, performance factors (i.e. symptoms) are considered to be indicators of failure. The study indicates that the most important symptoms of failure are insufficient profits, heavy operating expenses and burdensome institutional debt. Based on the symptoms and in the light of prevailing environmental conditions, company executives can adjust organizational factors, among which the most conducive to failure appear to be insufficient capital and lack of business, managerial and line experience.

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