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Critical Success Factors for Small Businesses in Emerging Markets: Advancing

UN Sustainable Development Goals

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Can critical success factors of Success factors

of small
small businesses in emerging businesses

markets advance UN Sustainable

Development Goals? 85
Ogechi Adeola Received 21 September 2019
Revised 24 May 2020
Lagos Business School, Pan-Atlantic University, Lagos, Nigeria Accepted 2 July 2020
Prince Gyimah
Department of Accounting Studies Education,
Akenten Appiah-Menka University of Skills Training and Entrepreneurial Development,
Kumasi, Ghana
Kingsley Opoku Appiah
Department of Accounting and Finance,
Kwame Nkrumah University of Science and Technology, Kumasi, Ghana, and
Robert N. Lussier
Department of Business Management, Springfield College, Springfield,
Massachusetts, USA

Abstract
Purpose – This study contributes to answering the question, can critical success factors of small businesses in
emerging markets advance United Nation (UN) Sustainable Development Goals (SDGs)? Specifically, this study
aims to explore the critical factors contributing to the success of small businesses and ultimately the UN SDGs
in the emerging market of Nigeria.
Design/methodology/approach – The design is survey research testing the Lussier success vs failure
prediction model for small businesses in Nigeria. The methodology includes a logistic regression model to
better understand and predict the factors that contribute to success or failure using a data set of 201 small
businesses in Nigeria.
Findings – The findings support the validity of the Lussier model (p 5 0.000) in Nigeria as the model
accurately predicted 84.4% of the small businesses as successful or failed with a high R-square value
(R 5 0.540). The most significant factors (t-values < 0.05) that predict the success or failure of businesses
support the findings that business owners that start with adequate capital, keep records and financial controls,
use professional advice, have better product/service timing, and have parents who own businesses can increase
the probability of success.
Practical implications – The study provides a list of critical success factors contributing to the growth of
small business in Nigeria, the largest economy in Africa. The findings can help entrepreneurs avoid failure and
advance UN SDGs 1, 2, 8 and 10. Implications for current and future entrepreneurs, public agencies,
consultants, educators, policymakers, suppliers and investors are discussed.
Originality/value – This is the first study to determine the factors that contribute to the success or failure of
small businesses in Nigeria using the Lussier model. It also discusses how to advance four of the UN
sustainability goals. Results support the Lussier model’s global validity that can be used in both emerging and
developed markets, and it contributes to the development of theory.
Keywords Nigeria, Small business, Success, Failure, Lussier model, United Nations SDGs
Paper type Research paper

World Journal of
Entrepreneurship, Management
Introduction and Sustainable Development
Small businesses do not only represent 92% of all businesses in developing countries but also Vol. 17 No. 1, 2021
pp. 85-105
contribute significantly to employment (60%) and gross domestic product (GDP) (40%) © Emerald Publishing Limited
2042-5961
of most countries, within Asia and sub-Saharan Africa (Gyimah et al., 2020; OECD, 2015; DOI 10.1108/WJEMSD-09-2019-0072
WJEMSD Page and Soderbom, 2015). These figures are not only significantly enhanced when informal
17,1 small businesses are included but also highlight the important roles of small businesses
including poverty, hunger and unemployment reduction (see EU, 2012; Hasan and Almubarak,
2016; OECD, 2015; Page and Soderbom, 2015; Sriram and Mersha, 2010). In short, the success
of small businesses is related to United Nation (UN) Sustainable Development Goals (SDGs) 1
(no poverty), 2 (zero hunger), 8 (decent work and economic growth) and 10 (reduced inequality).
These significant roles notwithstanding, over 70% of small business in emerging markets
86 lack access to credit and government services, among others. These constraints in part
contribute to stagnation and ultimate demise within the first five years of commencement of
business (Aremu and Adeyemi, 2011; Gyimah et al., 2019, 2020; Okpara, 2011). From this
point, the prediction of success or failure of small business continues to receive much
attention in the research topic (Davidsson and Klofsten, 2003; Gyimah et al., 2019, 2020;
Lussier and Halabi, 2008), practice and policy debates (Baidoun et al., 2018; Dennis and
Fernald, 2001; Gyimah et al., 2019, 2020).
In total, 24 years after Lussier’s (1995) small business failure prediction model, research
highlights inadequate capital (Barsley and Welner, 1990; Bruins et al., 2000; Gyimah et al.,
2019, 2020; Marom and Lussier, 2014; Hyder and Lussier, 2016), record keeping and financial
controls (Lussier et al., 2016; Rauch et al., 2005), lack of both prior industry and management
experiences (Bosma et al., 2000; Houben et al., 2005; Rauch et al., 2005) as significant factors
contributing to the collapse of small business. Others find lack of planning and professional
advice (Lussier and Corman, 1996), no education and higher-quality staff turnover (Lussier
and Pfeifer, 2001), as well as both product/service and economic timing (Houben et al., 2005) as
key attributes in prediction the small business failure phenomena. In sum, there is
inconsistency in prior study’s findings of the factors that contribute to the success or failure
of small businesses. From this point, Gyimah et al. (2019, 2020) and others are calling for more
research to enhance our understanding on why small businesses fail. In theory, survival of
small business is linked to UN SDGs 1, 2, 8 and 10. In practice, why small businesses survive
or fail remains an empirical question (see Gyimah et al., 2019, 2020; Hyder and Lussier, 2016).
This study attempts to fill this gap. Specifically, this study explores the critical factors
contributing to the success of small businesses and ultimately the UN SDGs in the emerging
market of Nigeria. Using a data set of 201 small businesses in Nigeria, consisting of 162
successful and 39 failed businesses, we find that the findings support the validity of the
Lussier model in Nigeria, and the most significant factors that predict the success or failure of
businesses support the findings that business owners that start with adequate capital, keep
records and financial controls, use professional advice, have better product/service timing
and have parents who own businesses can increase the probability of success.
This study has four major contributions. First, the use of Lussier’s model and the
nonfinancial information, in particular, to predict failure, has shown that inadequate capital,
wrong product/service timing and parents without business, as well as lack of both
professional advice and financial controls are related to the small business failure event.
Thus, we have evidence to support businesses that start undercapitalized and without
financial controls and professional advice have a greater chance of failure. This contributes to
the nonfinancial information indicators of failure prediction, a neglected gap in the extant
corporate failure literature (Appiah et al., 2015; Aziz and Dar, 2006). Second, this study
contributes to our understanding of the critical success factors of businesses that can reduce
the failure rate in Nigeria. Therefore, it has practical implications for start-up ventures and
established small business owners and managers. Also, government agencies, public
policymakers, investors, suppliers, educators and consultants can use the model to aid in
their decision-making. Thirdly, this study has practical implications that can also strengthen
the small businesses sector by contributing to a holistic approach in achieving four of the
17 United Nations SDGs (SDGs, 2015); including no poverty (SDG 1), zero hunger (SDG 2),
decent work and economic growth (SDG 8) and no inequality (SDG 10). Finally, since there is Success factors
no universal theory or model for predicting small business success or failure, this study of small
further validates the Lussier (1995) model as an international predictor of small business
success or failure that can be used in other countries to contribute to SDGs.
businesses
The rest of the paper proceeds as follows. Section 2 reviews the literature. Sections 3 and 4
present the methods and results, respectively. Section 5 provides the implications, and
Section 6 concludes the study.
87
Literature review
Motivation
The purpose of this study is to identify the critical success factors of small businesses in
sub-Saharan Africa in general and Nigeria in particular. At this point, our critics may ask,
why sub-Saharan Africa in general and Nigeria in particular? First, in September 25, 2014,
the World Bank’s Board of Executive Directors approved a US$500m International Bank for
Reconstruction and Development (IBRD) credit to increase access to finance for Nigeria’s
small businesses over a period of seven years (Agare, 2018). In total, seven years after this
joint effort between the World Bank, the African Development Bank (AfDB), Kreditanstalt
f€
ur Wiederaufbau (KFW) and Agence française de developpement (AFD) and the United
Kingdom’s Department for International Development (DFID) to provide stable funding to
support growth of Nigeria’s small business and thus stimulate economic growth and create
jobs, majority of newly established small businesses fail within the first two to three years
(Agare, 2018). In a sharp contrast, 87% of all enterprises in Nigeria are not only small
business but also account for 40 and 70% of GDP and employment, respectively, implying
small businesses contribute $150.52 bn of the total $376.3 bn GDP as at 2017. Specifically, the
$150.52 bn is higher than the respective GDPs of 6th to 10th biggest economies in Africa,
namely, Angola ($124.2 bn), Morocco ($109.8 bn), Ethopia ($80.9 bn), Kenya ($79.5 bn), Sudan
($58.2 bn) and Tanzania ($51.7 bn). These stylized facts suggest our findings on why Nigeria
small businesses fail may inform policy direction for governments and small business
managers in the Africa continent as a whole, thereby reducing corporate demise.
Second, despite the fact that 56 countries in four regions, namely Latin America, Central
and Eastern Europe, the Middle East/Africa and Asia, have been identified by the
International Monetary Fund (IMF) as developing economies in 2018, empirical evidence on
small business failure in emerging economies has focused on Chile (Lussier and Halabi, 2010),
Sri Lanka (Lussier et al., 2016), Pakistan (Hyder and Lussier, 2016) and Ghana (Gyimah et al.,
2019, 2020). In order to advance the development of theory and practice, contemporary
scholars (e.g. Appiah, 2011) state that the Middle East/Africa region, in particular, has
received little research attention and thus call for widened research scope to document why
small businesses fail in less developed countries. Also, five years, however, after Appiah’s
(2011) call, there is still a lack of attention being paid to small business failure research on
Africa (see Gyimah et al., 2019, 2020). For instance, recent systematic literature reviews by
Appiah et al. (2015) that focus on methodological issues on corporate failure prediction and
followed up Aziz and Dar’s (2006) initial study distinctively ignored a single corporate failure
prediction paper in the African context. In sum, additional corporate failure research focusing
on the region of Africa is welcomed to enhance our understanding on not only why firms fail
but also why competitors in the same less developed countries survive (Amankwah-Amoah
and Debrah, 2010; Gyimah and Boachie, 2018a, b; Latham and Braun, 2009).

Small business and SDGs

The United Nations Development Program (UNDP) is a leading UN development agenda
established in 2016 to help achieve SDGs, especially in emerging countries by 2030. These
SDGs can be effectively implemented if small businesses continue to grow in every economy.
WJEMSD This is because most businesses in both advanced and emerging markets comprise small
17,1 businesses, and they are the backbone of the economy (Aremu and Adeyemi, 2011). Thus, the
roles small businesses play in an economy cannot be overemphasized (Abor and Quartey,
2010; Ahmad, 2012; Bilal and Al Mqbali, 2015; Gyimah and Boachie, 2018a, b;
Okpukpara, 2009).
The growth of small businesses can help achieve the main purpose of SDGs. For instance,
they can help eradicate poverty (Masakure et al., 2009; Snodgrass and Winkler, 2004); create
88 employment (Mendy and Hack-Polay, 2018; Snodgrass and Biggs, 1996); increase social
cohesion and development; protect the world and ensure peace and stability (Abor and
Quartey, 2010). Small businesses need to be assisted and guided to grow, multiply and
replicate in attaining the UN SGDs such as no poverty (SDG 1); zero hunger (SDG 2); decent
work and economic growth (SDG 8) and no inequality (SDG 10).
Despite the significant roles of small businesses in every economy, they face numerous
external environmental challenges that hinder their development, such as lack of available
finance to start and grow a business, legal issues, environmental conditions and lack of
managerial training (Eyaa et al., 2010; Davari et al., 2012; Soomro et al., 2019; Tumwine et al.,
2015). However, there are other major internal environmental factors, including owner and
business characteristics that help and hinder the effectiveness and efficiency of the
performance of small businesses, which is the focus of this study in Nigeria.

Theory and the Lussier model

Resource-based theory (RBT) is commonly used for success vs failure research (Gyimah et al.,
2019, 2020; Lussier, 1995; Olawale and Garwe, 2010). RBT helps to better understand how
firms are able to identify and acquire resources, rather than how to deploy or allocate
activities for the success of operations (Lichtenstein and Brush, 2001). Wernerfelt (1984)
developed RBT to determine how firms explore resources to gain a sustainable competitive
advantage over other competing firms in the industry (Mahoney and Pandian, 1992).
RBT has been a fundamental theory in small business research and serves as a
benchmark for understanding how resources drive business performance (Barney, 1991).
According to Newbert (2007), business performance is based on attainting and allocating
resources. The theory states that access to adequate resources enhances the entrepreneur’s
ability to identify and capitalize on new opportunities (Davidsson and Honig, 2003). Due to
the significant role RBT plays in research and in the context of small businesses in Nigeria,
we selected the Lussier (1995) 15-success versus failure model to identify the critical factors
for the survival, growth and sustainable development of small businesses.
Lussier’s (1995) model is also the most extensive model for small business research that
considers distinct factors identified from 20 prior studies that contribute to a firm’s success or
failure (Halabi and Lussier, 2014; Lussier and Halabi, 2010 and Teng et al., 2011).
Additionally, the Lussier model is selected for this study because it includes owner’s
characteristics, business characteristics and the economic cycle of businesses. The owner’s
characteristics include the owner’s age, management and industry experiences, educational
level, owner’s marketing skills, whether the owner’s parents own a business and ethnic origin
(minority) of owners. Capital, planning, partnership, record keeping and financial control,
product or services timing, staffing and the use of professional advice are the business
characteristics. Moreover, economy cycle comprises the economic timing of the business
operations. Table A1 in the Appendix includes the Lussier (1995) model variables.

Empirical review
There is no accepted theory or model of variables that predicts success or failure of small
businesses. While others consider owner’s characteristics such as age as a predictor of
business success (Kangasharju, 2000; Lussier and Pfeifer, 2001), others argue that specific Success factors
managerial skills, experience, training and business environment predict business of small
performance (Ali, 2018; Benzing et al., 2009; Dess et al., 1997. Hofer and Sandberg (1987)
found that high-quality products and services are the main determinant of a firm’s success
businesses
and can be achieved through effective planning and proper management for making effective
production decisions.
Although the 15-variable Lussier model has been significant in multiple countries, recent
studies that have tested the Lussier model have different factors (t-values) that are the 89
primary contributors of the success of businesses in emerging and advanced markets. In the
advanced market, the original model was first conducted in the USA by Lussier (1995) and
found quality staffing, educational level of owners, specific business plan and the use of
professional advice as the main predictors of firm’s success. Lussier and Pfeifer (2001) found
staffing to be the main significant variable that increases the chance of business success in
Croatia. Teng et al. (2011) tested the model in Singapore and found product/service timing and
owner’s marketing skills as the most significant factors that contribute to the success of
businesses. In Israel, Marom and Lussier (2014) found capital, record keeping and financial
control, planning, professional advice and owner’s age as the most robust predictors of
business success.
In emerging markets, Hyder and Lussier (2016) concluded that a business can be
successful in Pakistan if entrepreneurs have adequate capital, have a specific plan, have
quality staffing and business partners. Baidoun et al. (2018) also found capital, record keeping
and financial control, planning and professional advice to be the key factors of business
success. Recently, Gyimah et al. (2019, 2020) found capital, economic timing and owner’s
marketing skills as the most significant variables to contribute to the success or failure of
firms in Ghana. The original Lussier 15-variable model (1995) was based on 20 prior articles.
Table A2 in the Appendix provides an updated comparison of the factors identified as
contributing or noncontributing success factors of small businesses from 42 studies. Note
that although the number of articles compared has more than doubled, there are still great
discrepancies in the findings, and thus, there is still no accepted theory or model to predict
small business success or failure.

Methods
Study procedure and sample
This study used the validated Lussier model (1995) survey instrument to survey businesses
owners in Nigeria. Trained professionals contacted business owners, provided them
guidelines in completing the questionnaires and collected the complete response sheet. A total
of 206 respondents were willing to participate in the survey; however, the analysis covers 201
responses. Incomplete and missing data affected the rejection of five responses. Out of 201
responses, 162 are categorized as successful businesses and 39 as failed businesses. Due to
the small number of failed businesses, logistic regression was run using a random sample of
39 successful and all 39 failed businesses. The result is quantitatively and qualitatively
similar to the results testing the model on the full sample. Thus, we conclude that although the
failure sample size is small, it is not subject to selection bias. The result is not reported to
conserve space but is available upon request. Table 1 shows summary statistics of the
sample.

Econometric model
This study duplicates prior studies using logistic regression to test the Lussier (1995) model
variables (e.g. Gyimah et al., 2019, 2020; Hyder and Lussier, 2016; Lussier, 1995; 2005; Lussier
and Halabi, 2010; Lussier et al., 2016; Teng et al., 2011). The model is
WJEMSD LogitðSuccessÞ ¼ logðlogðsuccess=failureÞÞ ¼ β0 þ β1 Capital
17,1 þ β2 Record keeping financial control þ β3 Industry experience
þ β4 Management experience þ β5 Planning þ β6 Professioanl advice
þ β7 Educational level þ β8 Staffing þ β9 Product=service timing
90 þ β10 Economic timing þ β11 Age of owner þ β12 Partners þ β13 Parents
þ β14 Minority þ β15 Marketing skills þ E€ (1)

The study also tested the differences between the failed and successful businesses and
measures the correlation between 15 variables. T-test is used to compare the mean differences
between the ratio and scale measures, chi-square is used to test mean differences of the
nominal measures and the Pearson correlation coefficient is run to measure the significant
relationships between the variables.

Demographics Failed Success

Variables Freq Percent Freq Percent Total Percent

Gender
Male 32 82.05 122 75.31 154 76.62
Female 7 17.95 40 24.69 47 23.39
Education
None 0 0.00 12 7.41 12 5.97
Basic 1 2.56 1 0.62 2 0.99
High school 4 10.26 16 9.87 20 9.95
Diploma 8 20.51 29 17.90 37 18.41
Bachelor’s degree 22 56.41 75 46.30 97 48.26
Master’s degree 4 10.26 28 17.28 32 15.92
Doctorate 0 0.00 1 0.62 1 0.50
Industry
Manufacturing 20 51.28 82 50.62 102 50.75
Service 10 25.64 44 27.16 54 26.87
Agriculture 4 10.26 7 4.32 11 5.47
Retailing 2 5.13 4 2.47 6 2.99
Wholesale 2 5.13 9 5.56 11 5.47
Construction 1 2.56 5 3.09 6 2.99
Transport and communication 0 0.00 6 3.70 9 4.48
Finance 0 0.00 5 3.09 2 1.00
Location
Lagos 15 38.46 102 62.96 117 58.21
Bauchi 2 5.13 20 12.35 22 10.95
Ibadan 9 23.08 16 9.88 25 12.44
Kaduna 11 28.21 7 4.32 18 8.96
Abuja 2 5.13 17 10.49 19 9.45
Size
Mean (the number of workers) 6 6
Table 1.
Sample demographic Business Age
statistics (N 5 201) Number of years (mean age) 4.6 6.8
Variable measures Success factors
Dependent variable. As in the original Lussier’s (1995) study, a dichotomous variable, success of small
or failure is the dependent variable. Lussier categorized failure through bankruptcy
court. However, due to the lack of bankruptcy records in Nigeria, this study follows the
businesses
methodology used by later studies in countries without bankruptcy courts including Gyimah
et al. (2019, 2020), Hyder and Lussier (2016), Lussier and Halabi (2010), Lussier et al. (2016) and
Teng et al. (2011). Thus, the profitability level is used to measure success or failure of
businesses. 91
A business is categorized as failure if the profit level is less than average profits or the
business is currently not making profit; a business is categorized as a success if the profit
level is average or above industry average profit. On a four-point scale, entrepreneurs were
asked to select the appropriate profits level, 1: profit is above the industry profit, 2: industry
average profit, 3: profit is below industry average and 4: currently not making profit.
Business owners that chose 1 and 2 are coded as 1 to denote success, and those that chose
3 and 4 are coded as 0 to denote failure.
Independent variables. In terms of the 15 independent variables, a seven-point scale is used
to measure capital, record keeping and financial records, planning, professional advice,
educational level, staffing, product/service timing, economic timing and marketing skills.
Other variables including partners, parents and minority are nominal measures coded as 1 or
2. The remaining variables industrial experience, managerial experience and age of owner
are ratio numbers of years. The first column of Table 2 shows the measures for the
15 independent variables.
Control variables. Firm’s characteristics including business size (the number of workers),
business age (the number of years in operations) and the industry are used as control
variables (Gyimah et al., 2019, 2020; Lussier and Halabi, 2010). Small businesses are more
prone to failure than large businesses (Shane, 1996). The mean of six workers for both failed
and successful businesses indicates that business size should not bias the results.
Reynolds (1987) controlled for the number of years in business because age affects the
success or failure of businesses since established firms have less chance of failure than new
firms. The mean years in business of 4.6 (for successful) and 6.8 (for failed) is not significantly
different (t-values > 0.05). The difference may be due to sampling variance. This implies that
business age should not bias the results.
Lussier (1995) found that retail and service firms fail more frequently than other industries.
However, the chi-square test result indicates that there is no significant difference between the
failed and successful firms by industry (X2 > 0.05) and thus should not bias the results.

Results and discussion

Descriptive statistics and test of difference
Table 2 reports the mean, standard deviation and test of significant difference between the
model variables for successful and failed small businesses in Nigeria. Table 2 reports that
successful businesses have 12 greater levels of resources than failed businesses; however,
only six are significant. Thus, based on lower level statistical test of differences,
entrepreneurs that start business with adequate capital (p 5 0.008), keep records and
control finances (p 5 0.000), have a specific plan (p 5 0.005), seek professional advice
(p 5 0.012), have better products/services timing (p 5 0.000) and have parents who own firms
(p 5 0.018) increase their chances of success. Though the failed businesses had three greater
levels of resources (educational level, age of owners and partners) than the successful
businesses, the differences are not significant.
WJEMSD Model Failed Failed Success Success Sig
17,1 Variables Mean SD Mean SD Testing

1. Capital (1 adequate – 7 inadequate)a 4.72 1.65 4.79 1.51 3.39

(0.008)
2. Record keeping and financial control (1 poor – 7 good) 4.23 1.77 5.24 1.18 4.30
(0.000)
92 3. Industry experience (the number of years) 6.92 5.28 7.85 6.09 0.88
(0.382)
4. Management experience (the number of years) 5.71 6.19 5.82 4.45 0.12
(0.902)
5. Planning (1 specific – 7 no plan)a 3.71 1.81 3.89 1.59 2.82
(0.005)
6. Professional advice (1 used – 7 not used)a
4.56 1.62 4.79 1.73 2.53
(0.012)
7. Education (1 none – 7 doctorate) 4.62 0.91 4.49 1.33 0.54
(0.589)
8. Staffing (1 difficult – 7 easy) 4.03 1.37 4.23 1.37 0.85
(0.394)
9. Product/service timing (1 introduction – 7 decline)a 2.35 1.22 3.14 1.23 3.58
(0.000)
10. Economic timing (1 expansion – 7 recession) a
3.85 1.44 3.50 1.12 1.64
(0.103)
11. Age of owner (the number of years) 34.44 7.01 34.12 7.54 0.24
(0.814)
12. Partners (1 owner 49.5% – 2 partners 50.5%) 1.79 0.41 1.78 0.41 0.02
(0.881)
13. Parents (1 yes parent-owned business 45.7% – 2 no 1.31 0.47 1.52 0.50 5.59
54.3%) (0.018)
14. Minority (foreigners) (1 yes 15.9% –2 no 84.1%) 1.44 0.50 1.36 0.48 0.82
Table 2. (0.367)
Nigeria descriptive 15. Marketing (1 unskilled – 7 skilled) 5.38 1.39 5.48 1.22 0.46
statistics and test of (0.645)
difference Note(s): aNote that these are reverse scale items. Therefore, a lower number is preferred/expected

Test of collinearity and multicollinearity

The correlations among the variables report 37 significant values (p < 0.050) in Table 3. The
issue of collinearity is problematic if the r-values are above 50% (r > 0.500). Statistical
textbooks, including Lussier (2005) state that when the r-values are above 70% (r 5 0.700),
then there is high collinearity. The study reports one correlation greater than 0.500;
(3) industry experience and (4) management experience (r 5 0.65). As expected, industry and
management experience are collinear since it is unlikely to have several years of managerial
experience without several years of industry experience.
Also, returning to Table 3, the key reason why some of the variables are not significant is
due to just, near or faced multicollinearity. This occurs when one independent variable is
linearly dependent on one or more other independent variables and without them, the
estimate would not occur. For example, management experience, industry and owner’s age
are likely to be highly correlated. Therefore, the issue of collinearity and multicollinearity
should not be problem for the study, and unlike simple test of differences, running logistic
regression addresses this problem.

Model validity and predictive power

The model result supports the Lussier model validity in Nigeria. The logistic regression
results in Table 4 indicate that the model is a good predictor of failure or success due to large
 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

1 1.00
2 0.27** 1.00
3 0.01 0.07 1.00
4 0.02 0.10 0.65** 1.00
5 0.39** 0.28** 0.06 0.00 1.00
6 0.28** 0.16* 0.07 0.07 0.38** 1.00
7 0.08 0.03 0.21* 0.18* 0.00 0.47** 1.00
8 0.11 0.15* 0.08 0.03 0.11 0.09 0.13 1.00
9 0.09 0.20** 0.04 0.04 0.09 0.07 0.29** 0.09 1.00
10 0.06 0.15* 0.15* 0.03 0.13 0.16* 0.01 0.10 0.21* 1.00
11 0.18* 0.12 0.22** 0.23* 0.12 0.16* 0.16* 0.12 0.00 0.03 1.00
12 0.14* 0.16* 0.05 0.00 0.17* 0.21* 0.16* 0.15* 0.12 0.04 0.03 1.00
13 0.09 0.02 0.00 0.06 0.09 0.17* 0.11 0.10 0.04 0.11 0.08 0.21* 1.00
14 0.02 0.01 0.01 0.04 0.22* 0.00 0.09 0.02 0.22* 0.01 0.17* 0.15* 0.06 1.00
15 0.10 0.16* 0.13 0.10 0.19* 0.10 0.05 0.27** 0.89 0.11 0.01 0.01 0.00 0.01 1.00
Note(s): Significance level **p < 0.01; *p < 0.05
businesses

93
of small
Success factors

Correlation matrix
Table 3.
WJEMSD Model parameter estimates Model B Model t-sig
17,1
Variables name
1. Capital 0.332 0.031
2. Record keeping and financial control 0.390 0.010
3. Industry experience 0.077 0.146
4. Management experience 0.472 0.406
94 5. Planning 0.018 0.897
6. Professional advice 0.363 0.022
7. Education 0.161 0.500
8. Staffing 0.061 0.736
9. Product/service timing 0.507 0.011
10. Economic timing 0.054 0.763
11. Age of owner 0.038 0.238
12. Partners 0.132 0.810
13. Parents owned a business 1.302 0.006
14. Minority 0.270 0.556
15. Marketing 0.136 0.434
Constant 2.027 0.476
Model test results
N 201
2 log likelihood 150.313
Model chi-square 57.480
Model significance 0.000
R-square 0.540
Classification results
Correctly classified cases
Success 96.30%
Table 4. Failed 66.67%
Nigeria logistic results Overall 84.08%

2 likelihood log statistics (2LL 5 150.313). The chi-square is like the F-test in standard
regression that is used to determine the model’s significant level in binary logistic regression.
The study reports a chi-square (57.480) with a significant level of less than 1% (model
significance 5 0.000). Thus, the model result reports that Lussier’s (1995) model is valid in
Nigeria and can correctly classify a group of firms as failed and successful more accurately
than random guessing 99% of the time. The model also reports a high R2 value (R 5 0.540),
confirming the validity of the Lussier model. The high overall logistic regression accuracy
classification (84.08%) of firms also confirms that the model is valid in Nigeria.
Therefore, an entrepreneur that starts a business operation with adequate capital, keeps
records and financial control, has industry and management experience, has specific plans,
makes use of professional advice, is literate, has few difficulties in recruiting and retaining
quality staff, has better product/service and economic timing, has partners, has parents who
own businesses and has marketing skills before starting business can increase the chances of
success.

Significant variables
Although the 15-variable model is valid, from Table 4, five variables are significant (0.95 CI,
t-values p < 0.05) and therefore are more relevant to success in Nigeria. They are (1) capital
(β 5 0.332, p 5 0.031), (2) record keeping and financial control (β 5 0.390, p 5 0.010), (5)
professional advice (β 5 0.363, p 5 0.022), (9) product/service timing (β 5 0.507, p 5 0.011)
and (13) parents (β 5 1.302 p 5 0.006).
Discussion of results Success factors
The study’s findings support the model’s validity in Nigeria and support prior studies in of small
other countries by Baidoun et al. (2018), Gyimah et al. (2019, 2020), Guzman and Lussier (2015),
Hyder and Lussier (2016), Lussier (1995), Lussier et al. (2016), Lussier and Halabi (2010) and
businesses
Marom and Lussier (2014). The significant t-value variables in Nigeria do support prior
studies in other countries.
Capital is one of the most significant variables that contribute to the success of small
businesses in Nigeria. Capital was also significant in recent studies including Baidoun et al. 95
(2018), Gyimah et al. (2019, 2020), Hyder and Lussier (2016), as well as earlier studies by
Cooper et al. (1990), Cooper et al. (1991), Reynolds (1987) and Reynolds and Miller (1989).
This study also finds that record keeping and financial control can increase the chances of
small businesses success in Nigeria. Recent studies by Marom and Lussier (2014), Baidoun
et al. (2018) and Lussier et al. (2016) also support that firms that are able to keep records and
control finances increase their chances of success.
In terms of professional advice, studies by Houben et al. (2005), Lussier (1995), Lussier
(1996a, b), Marom and Lussier (2014) and Baidoun et al. (2018), as well as earlier studies
including Barsley and Welner (1990), Copper et al. (1990, 1991), Crawford (1974), Flahyin
(1985), Hoad and Rosco (1964), Vesper (1990) and Wight (1985) also found that advice from
professionals can increase the success of businesses.
Product and service timing, which is also a predictor of business success in Nigeria, was also
significant in studies conducted by Carrelo-Morales (2015), Houben et al. (2005) and Lussier et al.
(2016) that tested the Lussier (1995) model. The results also support the findings of Lussier
(1996b) and Lussier and Corman (1996) that entrepreneurs whose parents own businesses have
a greater chance of success than owners whose parents did not own a business.

Implications
Implications for practice
Based on the empirical results supporting the Lussier model’s validity in helping to decrease
small business failure and increase success rates, the study supports the following practical
implications. First and foremost, the federal government of Nigeria should pay critical
attention to the most significant variables that contribute to business success and provide
policies that can strengthen small businesses. The government can use the Lussier model as a
tool to aid in the allocation of limited resources, such as aid and financial credits toward
higher potential small businesses. Government should also provide adequate funds to
business owners if they have good specific business plans geared toward economic
development that can provide the UN SDG number 8 – decent work and economic growth for
Nigeria. Providing aid to create jobs and economic grow directly contributes to less poverty
(SDG 1) and hunger (SDG 2) and more equality (SDG 8).
Moreover, government institutions such as the Small and Medium Enterprise Development
Agency of Nigeria (SMEDAN) and financial support institutions such as the Bank of Industry
and National Economic Reconstruction Fund (NERFUND) should consider strategies that will
provide low interest loans to business owners that can assist them in starting businesses with
adequate levels of capital that can provide decent work and economic growth for Nigeria (SDG
8), contributing to less poverty (SDG 1) and hunger (SDG 2) and more equality (SDG 8).
Also, the UNDP should support small businesses financially and also provide guidance
geared toward the critical factors using the Lussier model. This strengthens small business
grow, multiply and replicate in attaining the SDGs including no poverty (SDG 1); zero hunger
(SDG 2); decent work and economic growth (SDG 8) and no inequality (SDG 10).
Furthermore, educational institutions in Nigeria can use the model to train and educate
students as well as prospective entrepreneurs of the most significant factors that contribute
to the success or failure of businesses. Thus, training institutions should include the Lussier
WJEMSD model in their entrepreneurship curricula. For instance, the Enterprise Development Centre of
17,1 Pan-African University in Lagos can use the center to train, educate and advise aspiring
entrepreneurs based on the variables of the model. Consultants can also use the model with
business clients to help them establish and grow their ventures.
Potential lenders or investors, suppliers and other stakeholders can also use the Lussier
model in addition to other recognized methods to assess the probability of success or failure of
start-up and nascent businesses. Using the model, lender, investors and suppliers will have
96 fewer losses due to businesses that have failed. Thus, there will be less of a negative impact on
jobs and growth (SDG 8), as well as poverty, hunger and inequities (SDGs 1, 2, 10).

Implications for theory

Returning to Table 2, in 42 prior articles, there are wide discrepancies in the variables or
researchers have failed to clearly identify a list of the most significant variables that contribute to
the failure or success of small businesses. There is no globally accepted success versus prediction
model for small business. Currently, there is no empirical framework to develop a theory (Gyimah
et al., 2019, 2020). This study contributes to research and adds to the body of knowledge to better
understand and predict why businesses fail or succeed. Without a theory, the contributions of
this study can help to develop a theoretical framework that can be used to predict failure or
success of small businesses. This study can serve as a benchmark for future research.
Also, this study is the first of its kind to test the Lussier model in Nigeria, and it reinforces
the model global acceptance that can be used as in both emerging and advance markets and
moving toward a theory. Thus, an entrepreneur that starts a business with adequate capital;
keeps good record and financial control; has managerial, industrial and marketing
experience; has specific business plan; seeks professional advice; is more educated with
proper staffing; has good product and economic timing; has partners and parents who owned
a business and is not a minority has a greater chance of business success.

Limitations and future research

As with all research, this study has some limitations. First, the generalizability of the finding
to all emerging markets. This study only uses a sample from Nigeria to represent emerging
markets; however, the model has been tested in other emerging markets by Teng et al. (2011)
in Singapore, Guzman and Lussier (2015) in Mexico, Hyder and Lussier (2016) in Pakistan,
Baidoun et al. (2018) in Palestine and Gyimah et al. (2019, 2020) in Ghana. Future studies can
consider samples from other emerging markets to generalize the findings of the critical
factors that contribute to the success or failure of small businesses.
Second, eight of the independent variables were subjectively measured using a seven-
point scale. This can result in self-perception bias responses from business owners. Further
research can include more objective measures for the model variables and integrate more
objective probability variables for measuring business success or failure.
Third, the use of profitability levels to categorized successful and failed businesses is
another limitation. The model does not provide numerical guidelines to differentiate between
the dichotomous dependent variable (success or failure). At the time of conducting the research,
Nigeria did not have a record of bankrupt businesses to select failed businesses to match
against successful businesses. Even though trained professionals conducted the survey
research, they find it extremely difficult to locate small businesses that have failed. Thus, the
number of unprofitable businesses was lower, so future studies should include a larger sample
size for failed businesses. Future researchers can also collect data from businesses that have
actually failed and match them against successful businesses to make the results more robust.
Judgment is needed in assessing the 15 independent variables, such as subjectively
assigning a value of high, moderate or low to each variable and then making an overall
judgment of the probability of success or failure. Thus, when entrepreneurs, public agencies, Success factors
consultants, educators, policymakers, suppliers and investors use the Lussier model to of small
evaluate the success or failure of new ventures, they should note that the model can be used to
provide additional information to other bankruptcy or default assessment tools. However,
businesses
bankruptcy and default assessment tools are usually based on prior performance. Proposed
and nascent business ventures have no prior history, thus increasing the value of the Lussier
model for these small businesses.
Fourth, there are cultural factors that were not discussed or controlled. For instance, there 97
are so many differences between countries cultures such as economies, attitudes toward
business, legal systems, governance and other factors. Future research can develop and test
cultural control factors and also investigate how culture, economics and regulatory
environments can affect the failure or success of businesses.
Although the study reported a high R-square (R 5 0.540) and a strong predictive power of
84.4%, there are other variables that can contribute to business success or failure. Thus,
future research can include additional variables to the Lussier (1995) model to increase its
statistical predictive power.

Conclusion
The study concludes that the Lussier (1995) model is valid in Nigeria and predicted an overall
accuracy rate of 84.4% of the sample with a high R-square. Thus, the Lussier (1995) model is
robust for use as a global model that can be used to predict small business success or failure.
The study’s findings indicate five critical variables (t-values < 0.05) are the most significant
success variables of small businesses in Nigeria. Thus, if entrepreneurs want to succeed in an
emerging market (Nigeria), they should start with adequate capital, keep records and control
finances, use professional advice, have better product/service timing, and although it cannot
be controlled, it does help to have parents who own businesses. Overall, the result supports
that using the Lussier model will increase the number of successful small businesses in
Nigeria that in turn can contribute to the UN SDG (SDG 8) and create decent work and
economic growth for Nigeria. Providing support to create jobs and economic growth directly
contributes to less poverty (SDG 1) and hunger (SDG 2) and more equality (SDG 8).

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Further reading
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102 Corresponding author

Prince Gyimah can be contacted at: [email protected]; [email protected]
Appendix Success factors
of small
businesses
Success versus failure variables

Capital (capt): Businesses that start undercapitalized have a greater chance of failure than firms that start with
adequate capital 103
Record Keeping and Financial Control (rkfc): Businesses that do not keep updated and accurate records and do
not use adequate financial controls have a greater chance of failure than firms that do

Industry Experience (inex): Businesses managed by people without prior industry experience have a greater
chance of failure than firms managed by people with prior industry experience

Management Experience (maex): Businesses managed by people without prior management experience have a
greater chance of failure than firms managed by people with prior management experience
Planning (plan): Businesses that do not develop specific business plans have a greater chance of failure than
firms that do

Professional Advisors (prad): Businesses that do not use professional advisors have a greater chance of failure
than firms using professional advisors. A more recent source of professional advisors is venture capitalists
Education (educ): People without any college education who start a business have a greater chance of failing
than people with one or more years of college education

Staffing (staff): Businesses that cannot attract and retain quality employees have a greater chance of failure
than firms that can

Product/Service Timing (psti): Businesses that select products/services that are too new or too old have a
greater chance of failure than firms that select products/services that are in the growth stage

Economic Timing (ecti): Businesses that start during a recession have a greater chance of failing than firms that
start during expansion periods

Age (age): Younger people who start a business have a greater chance of failing than older people starting a
business

Partners (part): A business started by one person has a greater chance of failure than a firm started by more
than one person

Parents (pent): Business owners whose parents did not own a business have a greater chance of failure than
owners whose parents did own a business
Table A1.
Marketing (mrkt): Business owners without marketing skills have a greater chance of failure than owners with Lussier model (1995)
marketing skills variables
 17,1

104

to success
Table A2.
WJEMSD

Comparison variables

as contributing factors
identified in 42 articles
Scholars Capt rkfc inex maex plan prad educ staff psti ecti age part pent minor mrkt

Baidoun et al. (2018) F F N N F F N N N N N N N N N

Barsley and Welner (1990) F – F F F F – – – – – – – – –
Bosma et al. (2000) – – F – – – – – – – F – – – –
Bruins et al. (2000) F – F N – – N – – – F – – – –
Bruno et al. (1987) F F – F F – – F F F – – – – F
Carrero-Morales (2015) N N N N N N N F F N N N N F N
Cooper et al. (1990) F – N N F F N – F F F F – F –
Cooper et al. (1991) F – F N – F F – N N N N F F –
Crawford (1974) – – F – – F F – – N N – – – –
Cressy (1996) F – – F – – – – – – – – – – –
Dun and Bradstreet (1995) F F F F – – – – – F – – – – –
Flahvin (1985) F F F F – F – F – – – – – – –
Gaskhill et al., (1993) N F F F F F N – – N – – – – F
Gyimah et al. (2019, 2020) F N N N N N N N N F N N N N F
Guzman and Lussier (2015) N N N N N N N N N N N N N N N
Hoad and Rosko (1964) – – F N N F F – – – – – – – –
Houben et al. (2005) N N N F F F N N F F N F N N F
Hyder and Lussier (2016) F N N N F N N F N N N F N N N
Kennedy (1985) F – – F F – – – – F – – – – –
Lauzen (1985) F F – F F – – F – – – – – – –
Lussier and Corman (1996) F F F N F F F F N F N N F F N
Lussier and Halabi (2010) N N N N N N N N N N N N N N N
Lussier and Pfeifer (2001) N N N N F F F F N N N N N N N
Lussier (1995) N N N N F F F N N N N F N N N
Lussier (1996a) N F N F F F N F N F N F F N F
Lussier (1996b) N F N N F F N N F F F N N N N
Lussier et al. (2016) N F N N F – N F F – – N – – F
Marom and Lussier (2014) F F N N F F N N N N F N N N N
McQueen (1989) F – F F – – – – – – – – – – F
Rauch et al. (2005) – – F F – – F – – – – – – – –
Reynolds and Miller (1989) F F – – F – N N F – N F – – –
Reynolds (1987) F F – – F – – N F – – – – – N

(continued )
 Scholars Capt rkfc inex maex plan prad educ staff psti ecti age part pent minor mrkt

Sage (1993) F – – F – – F – – – – – – – –

View publication stats

Santarelli (1998) – – – – – – F – – F – – – – –
Schutjens and Weaver (2000) – – – – F – – – – – – F – – –
Sommers and Koc (1987) – – – F F – – F – – – – – – –
Teng et al. (2011) N N N N N N N N F N N N N N F
Thompson (1988) N – – F F – – F F – – – – – –
Vesper (1990) F F F F N F F – F F – F – – F
Wight (1985) F F – F – F – – – – – – – – –
Wiklund and Shepherd (2003) F – – F – – – – – – – – – – –
Wood (1989) – F F F F – F – – – F – – – –
Total F 22 16 14 19 22 17 11 11 11 11 6 8 3 4 9
Total N 12 9 15 17 7 6 16 11 11 12 15 12 12 12 11
Total – 8 17 13 6 13 19 15 20 20 19 21 22 27 26 22
Note(s): F supports variable as a contributing factor
N does not support variable as a contributing factor
– does not mention variable as a contributing factor
businesses

105
of small
Success factors

Table A2.