Success and Failure Determinants of Small Businesses: Evidence from Qardho, Puntland, Somalia

This paper explores the success and failure determinants of small businesses in Qardho, Puntland, Somalia, and specifically, how the internal and external factors can affect the business performance. A survey was conducted on a sample of 150 owner-managers of small firms in that a structured questionnaire was distributed in a cross-sectional, quantitative design. The analysis of reliability showed acceptable internal consistency on all scales. Descriptive findings showed that there was a moderate agreement on the significance of internal capabilities, i.e., management skills, planning, innovation as well as financial control and a strong agreement in terms of external conditions (availability of finance, infrastructure development, and regulatory support). Correlational analysis established a positive relationship between internal and external success factors and business performance as well as negative relationship between the perceived risks of failure and the success factors. The multidimensional regression analysis also showed that the external factors used were a strong predictor of the performance (β =.426, p =.001) as it predicted 25.4 percent of the variance, but the internal competencies and perceived risk of failure did not have a significant effect on performance. In general, the results highlight that the performance of Qardho SMEs largely relies on the external business environment and that the financing schemes, infrastructures, and favorable policies and skills in managerial positions should be improved. The research adds to the scanty existing empirical evidence on the topic of SMEs in Puntland and provides recommendations to policy makers, practitioners, and researchers interested in enhancing the resilience and development of local enterprises.