A Causal Analysis of Conglomerate Bankruptcies

Abstract

Purpose-Strategic causes for the failure include unrealistic growth, overexpansion, unfamiliar new markets, volume obsession, unrealistic promises and poor project selection. Organizational causes are insufficient capital and profits, lack of business knowledge, poor financial management, poor sales skills, inadequate marketing, poor leadership, poor leadership transfer, project losses, poor field performance and owner bankruptcy. Uncontrollable causes include industry and economic weakness and banking and surety changes. While helpful, the list provides insufficient clarity regarding the causal roots of failure. Research design, data and methodology-The research framework to organize the information involved with many of the recent and large failures in the industry. Results-This research then identified five dominant root causes-excessive egoism, poor strategic leadership, too much change, loss of discipline and inadequate capitalization. Conclusion-Finally, additional input from external forces may accelerate the firm's pace to failure. It is important on the development of diagnostic tools that are based on this model and that will provide new ways to assess a conglomerate's level of risk for incurring a financial crisis.

The Anatomy of Entrepreneurial Failure: Antecedents of the Performance Failure Appraisal Inventory and the Role of Social Support

“…According to Amankwah-Amoah [49], the entrepreneurs' failure was due to overexpansion. Similarly, KU and Whang [50] investigated conglomerate failures and concluded that, among other things, overexpansion and unrealistic growth were major causes of failure. Previously, the failure of entrepreneurs was largely explored in economics and finance literature.…”

“…Amankwah-Amoah [49] attributed organizational failure to overexpansion. Similarly, KU and Whang [50] studied conglomerate failures and concluded that overexpansion and unrealistic growth were prominent factors for failure, among other factors. Therefore, we propose the following hypothesis: Hypothesis 4 (H4).…”