Examining New Venture Failure Rates: A New Zealand Study

Abstract

This article examines the controversy surrounding business failure rates, particularly those associated with start-up firms. Differences of opinion on the true rate of failure arise not only from differences in the definition employed, but also from the deficiencies present in many of the published studies. An improved methodology is used to conduct a nationwide study of the failure rates of New Zealand new ventures. The results demonstrate the all pervasive nature of the risk of starting a new venture, which differs little between small and large firms, affects all industries, all geographical locations, and all types of organisation. New evidence is presented showing the high rate of new business formation dictates the high level of business failure and provides a powerful argument against those who claim true failure rates are low.