Small businesses are more predominant in New Zealand than in many other countries (Ministry of Economic Development Statistics, 2001). This makes it important to accurately capture small business statistics for policy reasons. As suggested by Bannock & Doran (1980), the worst gap in British statistics, and indeed in virtually all other countries, is in statistics on new enterprise formations (births) and failures (deaths).
The “death” or failure of a small business does not generally become public knowledge and this can result in ambiguity as to whether a small business has actually failed or not. As information is not made readily available, researchers generally use one of several proxy events of failure. Confusion has stemmed from the existence of more than one failure proxy in literature. This has been exacerbated by confusion over how the estimated failure rates should be interpreted.
This study uses shopping centre data, and suggests that it may be possible to aggregate failure rates within identifiable small business sectors. It is suggested that, where statistically appropriate, a sector-by-sector understanding of failure rates would greatly enhance the perception of ‘likelihood of failure’ as a risk factor.
The small business literature has shown us that across the small business sector, data are usually widely spread and the ‘small business experience’ across many measured dimensions varies greatly. It seems logical, therefore, to build our understanding of small business, including our understanding of failure rates, on a sector-by-sector basis, where statistically appropriate. Care must be taken, therefore, not to generalize about the small business experience from one sector to the next.
This study expands on our understanding of small business failure in shopping centres (Watson and Everett (1999)) into New Zealand by further comparing failure rates between the ‘managed’ and ‘unmanaged’ shopping centres. We find that the New Zealand shopping centre failure rates are similar to those in Australia, that published government failure rates are much higher that the experience of this study and, therefore, somewhat misleading, and that extending our understanding of failure rates to the shopping centre sector by use of managed shopping centre data seems appropriate.
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