Investigating the causes and outcomes of failure among entrepreneurs in

Sudan

A thesis submitted to the Bucerius Master of Law and Business Program in

partial fulfillment of the requirements for the award of the Master of Law and

Business (“MLB”)

Sara Galaleldin

July 23, 2020

12.024 words (excluding footnotes)

1st Supervisor: Prof. Dr. Peter Witt

2nd Supervisor: Prof. Dr. Dirk Holtbrügge

Abstract This thesis explores the main causes of entrepreneurial failure from the perspectives

of the entrepreneurs in Sudan. The findings showed that the main causes of

business failure included internal and external factors. However the external factors

were found to have stronger impact on entrepreneurial failure and included

unfavourable economic situation, product/service related issues,

managerial/organizational issues, lack of funding/financial difficulties and the legal

environment.

This is the first study that focuses on examining entrepreneurial failure within the

context of Sudan. The findings provide relevant insights for the policy makers, the

academics and all the active bodies interested in the field. In light of the findings, the

author provides recommendations that may help policy makers in formulating policies

and programs that support the Sudanese entrepreneurs and enable them to develop

their businesses in a sustainable business environment.

Key words: Failure, Entrepreneurship, Sudan, Causes, Entrepreneur, learning

Acknowledgement

I would like to express my sincere gratitude to my supervisors Prof. Dr. Peter Witt

and Prof Dr. Dirk Holtbrügge for their support and guidance.

I am also grateful for the amazing support and encouragement from my family and I

would like to thank them.

Special thanks also go to my dear friend Lina Elshafie for supporting and connecting

me with entrepreneurs in Khartoum.

I would like also to thank Asia Kambal for taking the time to proofread my paper and

for the constructive feedback!

Finally, this thesis would not have been possible to complete without all the

participants who agreed to be part of the study, many thanks and appreciation for

your involvement.

Sara Galaleldin Hamburg, Germany July 23, 2020

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TABLE OF CONTENTS

1. Introduction ......................................................................................................... 4

1.1. Background ......................................................................................................... 4

1.2. Research Purpose ............................................................................................... 6

1.3. Research Questions ............................................................................................ 6

1.4. Relevance ........................................................................................................... 7

1.5. Research Outline................................................................................................. 8

2. Literature and Theoretical Review ..................................................................... 9

2.1. The development of Entrepreneurship in Sudan ................................................. 9

2.2. Literature Review on the causes of entrepreneurial failure ............................... 11

2.3. Entrepreneurial failure defined .......................................................................... 14

2.4. Attribution Theory .............................................................................................. 16

2.5. Learning from Entrepreneurial Failure ............................................................... 16

3. Methodology ...................................................................................................... 18

3.1. Research approach ........................................................................................... 18

3.2. Data Collection .................................................................................................. 18

3.3. Case Study as a Strategy .................................................................................. 19

3.4. Data analysis ..................................................................................................... 20

4. Analysis (Findings) ........................................................................................... 21

4.1. Why we failed – as perceived by the entrepreneurs .......................................... 21

4.2. General Perceptions on the causes of entrepreneurial failure ........................... 23

4.3. Causes of failure ............................................................................................... 24

4.4. Lessons Learned ............................................................................................... 31

5. Discussion ......................................................................................................... 33

5.1. The dominance of the external factors .............................................................. 33

5.2. The perceptions in comparison ......................................................................... 36

5.3. Are the internal factors equally important? ........................................................ 37

5.4. What have the entrepreneurs really learned? ................................................... 38

5.5. The impact of failure .......................................................................................... 39

6. Conclusion ......................................................................................................... 41

6.1. Summary of findings and recommendations ..................................................... 41

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6.2. Practical and theoretical contributions ............................................................... 44

6.3. Suggestions for further research ....................................................................... 44

6.4. Research Limitation ........................................................................................... 45

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LIST OF FIGURES

Figure 1: Inflation rates in Sudan from 1980 to 2020 ................................................ 35

LIST OF TABLES

Table 1: Characteristics of the failed entrepreneurs ................................................ 22

Table 2: Causes of failure (failed entrepreneurs) ...................................................... 22

Table 3: Causes of failure (successful entrepreneurs) ............................................. 23

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1. Introduction

1.1. Background

The role of entrepreneurship as a driving force for innovation and economic growth

has been acknowledged by governments worldwide and extensively emphasised by

research. During the last two decades, there has been a growing presence of an

entrepreneurial scene in Sudan where poverty is prevalent with a high rate of 46.5%

(World Bank, 2009) and unemployment rate of 16.5% (World Bank, 2019). To

promote the development of entrepreneurship as a tool for poverty alleviation, job

creation and economic development, various policy reforms and initiatives were

undertaken by governmental institutions. For instance, the launch of a microfinance

unit at the Central Bank of Sudan in 2007 paved the way for new and upcoming

entrepreneurs to develop their businesses.

However, entrepreneurs are often confronted with various impediments that impact

the success of their businesses. In fact, studies have indicated that new businesses

are faced with high rates of failure (Timmons, 1994 cited in Zacharakis, Meyer &

DeCastro, 1999). Therefore, it becomes vital to develop an understanding of how

entrepreneurs heal and progress from this often hurtful and destructive experience by

focusing on fruitful learning lessons that can be produced from failure (Cope, 2011).

Although previous research has focused expansively on exploring entrepreneurial

success rather than failures, the phenomena continues to be a critical element of the

entrepreneurial process. McGrath (1999) has proposed that research should move

from this anti failure bias to an integrative outlook of how failure and success are

related. She suggests that failed ventures can enhance knowledge or production

techniques.

Studies on entrepreneurial failure have explored various aspects such as the

financial, social and emotional implications that arise from entrepreneurial failure

(Gimeno, Folta, Cooper & Woo, 1997; Shepherd 2003; Cope, 2011). It has been

suggested that the emergence of greater understanding of new venture failures

would potentially offer important information for various main stakeholders involved in

a new venture (Liao, Welsch & Moutray, 2008) and that acknowledging an

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enterprise’s failure and closure are basics fundamental for managerial success

(Coelho & McClure, 2005).

While the abundance of studies provides useful insights and elements that can guide

our understanding of entrepreneurial failure, the applicability and relevance can vary

especially within different contexts. The entrepreneurial activities in any country are

rooted in an environment as well as impacted by interplay of conditional factors,

which can potentially encourage or obstruct the business environment and thus in

turn affects these entrepreneurial activities negatively or positively (Gangi &

Mohammed, 2017). Boso, Adeleye, Donbesuur & Gyensare (2019) note that most of

the previous studies on business failure were much focused in the developed

countries, while in Africa the research on this topic appears to be limited.

In Sudan, a least developed country, there is a general lack of knowledge with

regards to entrepreneurial failure among entrepreneurs given the scarcity of scientific

research in the field and availability of data on entrepreneurship. For many years, the

business environment in Sudan has faced many challenges due to sharp inflation,

political instability, and economic downturns making it more difficult for entrepreneurs

to strive and sustain their businesses in a highly volatile environment.

In 2018, Sudan participated in the Global Entrepreneurship Monitor (GEM) report for

the first time, which provided a comprehensive insight into the entrepreneurial

environment and activities. Based on the Adult Population Survey (APS) on a

representative sample aged 18-64 years old, the report revealed the highest rate of

business discontinuation in its zone about 17.3% among entrepreneurs in Sudan.

The main reasons for business discontinuation were identified as lack of financial

means, family/personal circumstances and lack of business profitability which

indicated that new businesses struggle to grow and maintain their activities in a

challenging environment.

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1.2. Research Purpose

The topic of this thesis has not been addressed sufficiently within the African

continent and particularly within the Sudanese context. In Africa, there have been few

studies made on the factors that cause entrepreneurs to fail (Fatoki, 2014), while to

the best knowledge of the author, no one has done a published study on why

entrepreneurs fail in Sudan. Given the high uncertainty and potential failure of many

entrepreneurial activities as indicated by previous literature and the emphasis on the

importance of researching failure, it becomes vital to understand why entrepreneurs

fail, how they experience their failures and more importantly the learning outcomes

from these experiences. Hence, the purpose of this thesis is to explore the main

causes of entrepreneurial failure from the perspective of the entrepreneurs

themselves considering that they are the main driver of the entrepreneurial process.

By painting a broader picture of how entrepreneurial failure is perceived, the writer

intends to assess whether there are any lessons to be learned from the experience

and look into its impact on the entrepreneurs whether it left a negative or a positive

impression. Thus, this thesis aims to address the need for further research in the

region under study in order to contribute to the understanding of the phenomena of

entrepreneurial failure. The author also aims to shed light on the current issues

relating to the topic by providing insights that are of relevance for researchers,

venture capitalists, policy makers, and practitioners and other bodies that are active

in the field to shape policies and actions that support the business environment and

enable entrepreneurs to sustain and grow their businesses.

1.3. Research Questions

The main objective of this explorative research was to investigate the causes of

failure for Sudanese entrepreneurs to gain a better understanding of the

circumstances that drive failure, the learning outcomes (if any) and its implications.

For the purpose of my research, I selected a broader definition of entrepreneurial

failure that seemed most suitable to touch upon all the relevant aspects of the topic.

The study was guided by the following main research question:

a. What are the main factors that cause Sudanese entrepreneurs to fail?

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While this research did not specifically focus on testing whether there are learning

lessons to be produced from entrepreneurial failure or how they impact the

entrepreneurs, it is worth exploring how entrepreneurs perceive the entrepreneurial

failure and whether there are any takeaways (learning if any) from their experiences.

Hence, the thesis will attempt to touch on the social and psychological cost of

business failure as experienced by the entrepreneurs. Therefore, the following

additional question was formulated:

b. What are the lessons learned from entrepreneurial failure as perceived by

Sudanese entrepreneurs?

This study does not aim to find precise answers for these questions but rather to

explore the different perceptions and viewpoints of the entrepreneurs on the topic.

1.4. Relevance

The topic of entrepreneurial failure is highly interesting for different reasons. Firstly,

entrepreneurship as a concept has been regarded as a valuable instrument to

address relevant issues in developing countries including poverty reduction, creating

jobs and opportunities, encouraging innovation, empowering women. In Sudan, many

new businesses are created out of necessity to address social issues and create

employment opportunities. Thus, just as much as we celebrate success stories,

unsuccessful stories of entrepreneurs should be equally shared to provide us with a

deeper understanding of the topic and how it can be addressed.

Secondly, existing research has moved from focusing on investigating the causes of

business failure to exploring other relevant subjects such as sense-making, the social

and emotional consequences of entrepreneurial failure. Hence, this study hopes to

encourage the initiation of discussion on this rather sensitive topic in order to open

the door for further studies on entrepreneurial failure in Sudan to address other

aspects of the phenomena. The topic of this study is not only relevant for scholars in

the field, but will also provide relevant input to the governmental institutions and the

overall start-up community in the country.

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1.5. Research Outline

Subsequent to this introduction, the thesis is structured as follows:

Section 2 will address the literature review. It will start with an overview of

entrepreneurship within the Sudanese context. Second, previous literature on the

topic shall be discussed. Third, the definition of main concept of entrepreneurial

failure is presented followed by attribution theory and a brief overview of learning

from failure.

In section 3, the research methodology shall be described. This will include

information on the qualitative approach used for the study, data sample, data

collection and analysis. In section 4, the empirical data will be presented and

analysed.

Section 5 will include discussion of the findings and its relevance to existing

literature. Lastly, in section 6 a summary of the study’s main findings will be

provided, followed by practical and theoretical contributions as well as

recommendations for policy makers, practitioners, and academics.

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2. Literature and Theoretical Review

2.1. The development of Entrepreneurship in Sudan

In recent years, there have been many policies taken by governmental bodies as well

as initiatives undertaken by private and non-profit enterprises to support and

encourage entrepreneurial activities in Sudan. Gangi and Timan (2013) note the

development of entrepreneurship through government policies during three phases.

The first phase, before 1992, much of the focus of governmental policies was on

public enterprises which were given support and priority over private entities as

means for increasing job opportunities and achieving economic development. The

second phase during 1992-2005, the Sudanese government with a technical support

from World Bank and the IMF created various policy reforms on the macroeconomic

and the microeconomic levels. The purpose was to encourage the entrepreneurial

environment and attract domestic and foreign investments in the country (World

Bank, 2006 cited in Gangi & Timan, 2013). The third phase throughout 2005-2011

witnessed numerous policies and legislation in support of entrepreneurial activities,

including the launch of a microfinance initiative. However, the private sector in Sudan

during this period faced many difficulties due to external factors that were out of its

control and thus hindered development and diversification. These issues as defined

by private sector companies included namely corruption, economic and political

instability which are all related to the government (World Bank, 2009).

The influence of governmental actions and policies on the entrepreneurs in Sudan

remains unclear given the limited available data and lack of scientific research in the

field. The business environment continues to suffer from many challenges that

hinder the development of new ventures and their growth, which suggests that these

efforts have had little impact on improving the entrepreneurial environment. In an

effort to understand the impact of the implemented policies and social aspects on the

entrepreneurial environment, Gangi & Timan (2013) conducted a study to explore

how potential entrepreneurs perceived the entrepreneurial environment in Sudan.

Their findings showed that it was observed as weak, attributing the political, legal,

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administrative, social, and cultural conditions as poor, while other factors including

economy, education and infrastructure was perceived as fair. Their results suggest

that entrepreneurs generally face many challenges in Sudan where the businesses

environment appears to be not so entrepreneur- friendly.

On the other hand, Khattab, Ahmed & Mohamed Ahmed (2017) conducted an

exploratory study on the factors that impact the success of entrepreneurs in Sudan

based on questionnaires that were collected from 62 entrepreneurs. Their findings

highlighted finance as a vital component for successful businesses as well as

managerial capabilities, appropriate government policies and network. The

perception of entrepreneurship as a good career choice in Sudan was revealed to be

highly positive standing at 79% as means for resolving social issues (GEM Sudan,

2018). Despite this positive viewpoint, the percentage of established business stands

only at 10%, in comparison with nascent and new businesses which had a total rate

of 22.1% (GEM Sudan, 2018).

The World Bank’s doing business report 2020, which measures a number of

business regulations based on a number of indicators across 190 economics,

reported that Sudan stands at the bottom of rankings (171 out of 190), with low

scoring for starting a business, paying taxes, getting credit, resolving insolvency and

others. Hence, these findings reaffirm the reality that Sudan continues to be a

challenging country for entrepreneurs to thrive in. According to GEM Sudan report

(2018), the rate of business discontinuance which included selling, shutting down or

discontinuing ownership/management in the Sudanese context was found to be the

highest in the region. This main causes mentioned were financial inadequacies, low

profits, and personal and family problems.

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2.2. Literature Review on the causes of entrepreneurial failure

There has been a considerable body of research which engaged in investigating

factors that lead to business/entrepreneurs’ failure or developed models to test

certain factors that impact the survival or failure of new ventures. These factors are

often characterized as external factors relating to the environment conditions which

are outside entrepreneurs’ control and internal factors relating to the internal

organizational aspects of a business. In the 1960s, a study began to track the

development of 250 technology based ventures in Northern California over a period

of 20 years (Bruno, Mcquarrie & Torgimson, 1992). It revealed that 50% of the

companies that were examined failed (discontinued) by 1988, while 32% of the firms

had either merged or had been acquired, and 18% had continued to operate as

independent businesses. The main factors identified by failed entrepreneurs whom

were interviewed at the time included internal causes, such as managerial or key

employee issues and external factors namely product or market challenges and

financial difficulties (Bruno, Leidecker & Harder 1987).

Zacharakis et al. (1999) studied venture failure by comparing the perceptions of

entrepreneurs with venture capitalists (VC). Their results showed that the perceptions

differed, while the entrepreneurs attributed reasons of failure mainly to internal

factors (poor management); the VCs attributed the causes of failure to external

factors (weak market conditions). The authors focused mainly on bankrupt firms and

their findings highlight the potential danger of incorrect attributions, which could lead

to the application of wrongful actions.

Arasti, Zandi & Bahmani (2014) investigated the causes of business failure from the

perspectives of successful and unsuccessful entrepreneurs in the Islamic Republic of

Iran. Their findings showed that inappropriate polices including uncertainty of rules

and regulation, absence of support, bureaucracy and deficiency of monitoring

regulations as perceived by the participants is the main factor for business failure.

This indicates that the Iranian businesses are affected by the government policies

which were found to hinder the continuity and survival of enterprises.

Carter and Wilton (2006) argue that governments play a central role in attaining a

positive enterprise development. They sought to understand the cause of failure for

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enterprise development in Zimbabwe by interviewing several entrepreneurs whom

identified main issues to be personal, cultural, economic, political and financial

factors, as well as education, training and government’s policies. The researchers

further debate that these factors can be influenced by the government which can

provide support for the entrepreneurs through facilitating policies and programs that

create a favourable environment for constructive enterprise development.

Few studies were also conducted within the African context. One study on the

analysis of the causes of failure for new SME in South Africa by Fatoki (2014)

showed that both the internal and external factors including lack of managerial

expertise, competition, lack of funding, and crime contributed to the failure. Ihua

(2009) examined 10 key SME failure factors in the United Kingdom in comparison

with Nigeria. He found that while internal factors such as poor management was

considered as the most significant factor impacting SME failure in the UK, external

factors such as weak economic conditions and poor infrastructure were the most

critical factors in Nigeria. The study indicates that the impact of the factors had been

differently perceived and prioritized within the two different regions which in turn are

influenced by different business conditions

More recently, Pardo and Alfonso (2016) investigated the main factors that cause

entrepreneurial failure in Colombia by applying attribution theory. Their findings cited

the main causes as financial, organizational and marketing respectively.

These previous studies mainly focused on exploring the topic from the perspective of

the entrepreneurs. Other studies relied on models to investigate the impacts of some

factors (internal and external) on the survival and failure of new ventures. One of

these studies was conducted by Romanelli (1989). She found that both the

environmental circumstances independently as well as together with organization’s

strategies impact the prospect of survival for new ventures. She suggests that

founders of these ventures can improve the chances of survival by timing the

foundation of their businesses with increasing sales in the industry as well as by

attempting to adopt strategies for acquiring resources based on the conditions of

environments.

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Similarly, a predictive model for performance of new firms was developed by Cooper,

Gimeno-Gascon & Woo (1994) based on human and financial factors. The model

measures the probability of ventures’ performance by three possible outcomes:

failure, marginal survival or high growth. By testing several variables, their findings

showed that general human capital, initial financial resources and industry specific

experience impacted the survival and growth of new ventures, whereas, the level of

management, expertise and previous experience found to have little influence.

Based on their examination of human, social and financial capitals of nascent

entrepreneurs, Liao et al. (2008) findings indicate that resources acquisition reduces

the changes of entrepreneurial discontinuance (especially financial capital).

However, not all of them are equally important particularly within different types of

industries.

As previously indicated by existing studies, entrepreneurs face many challenges

especially in the first years of venture establishment. Thornhill and Amit (2003)

confirm the claim that failure occurs due to different reasons and at different ages at

the organizational level. By studying bankrupt firms at different firm ages, they found

that young enterprises fail because of inadequate general management skills, while

mature enterprises were impacted significantly by the competitive environment which

causes their failure. They argue that young enterprises lack the necessary resources

and skills due to the “liabilities of newness” (Stinchcombe, 1965).

The literature review has revealed that the internal and or external factors can cause

venture failure and in some cases a combination of these factors are involved. It has

been observed that the financial and managerial aspects appeared more frequently

in the findings of previous research. However, it is important to note that the findings

were influenced by how failure was conceptualized by the researchers.

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2.3. Entrepreneurial failure defined

There have been various definitions offered by scholars to describe the phenomena.

Previous research also attempted to analyse entrepreneurial failure both at the firm

and individual level.

When considering the definition of failure, it becomes essential to differentiate

between closure and failure (Headd, 2003). It was emphasized by previous research

that business discontinuance can occur due to different reasons such as change of

interest (Bruno et al., 1992) which may not necessarily mean that the business was

failing.

A narrow perspective – failure due to Bankruptcy, Insolvency

Bankruptcy embodies an indication for a failing enterprise, which is costly for all

relevant stakeholders (Moulton & Thomas, 1993). Some scholars applied a narrow

definition of failure by examining bankrupt enterprises (Zacharakis et al., 1999).

Applying bankruptcy as a definition is advantageous because it is an observable and

documented event (Ucbasaran, Shepherd, Lockett & Lyon, 2013). Nonetheless,

failure as a concept is often much broader than bankruptcy, and that business could

be terminated as a consequence of minor relational conflicts between new enterprise’

members as well as the entrepreneur’s own limitation (Singh, Corner & Pavlovich,

2007).

Failure was also examined as a discontinuity of ownership due to insolvency.

Accordingly, business failure is defined as “when an enterprise has not survived the

market test” (Coelho & McClure, 2005, p.14). The market test here is explained as

when a company’s revenues do not adequately surpass its costs in a way that would

make the prolongation of an enterprise appealing then it has failed (Coelho &

McClure, 2005). Shepehrd (2003) provides a broader definition that includes both

discontinuity of ownership and insolvency;

“Business failure occurs when a fall in revenues and/or a rise in

expenses are of such a magnitude that the firm becomes insolvent

and is unable to attract new debt or equity funding; consequently, it

cannot continue to operate under the current ownership and

management” (Shepherd, 2003, p.318)

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Although these definitions provide a narrow and clear view of failure, they ignore the

non-economic factors which may have significant impact on a venture’s failure.

A broader perspective – failure as discontinuity of ownership

Singh et al. (2007) adopts an operative definition of business discontinuance based

on the view supplied by Bruno et al (1992). Hence, failure is defined not only in

terms of economic factors such as bankruptcy and insolvency, but also other causes

are examined such as termination of a business due to legal issues, personal

problems of the entrepreneur and unyielding disputes (Singh et al., 2007).

Discontinuity of ownership due to performance below threshold

Gimeno et al. (1997) argue that the application of personal performance’s threshold

of the entrepreneur allow us to widen the existing understanding of entrepreneurial

exit by taking into the account the economic performance as well as non- economic

performance causes for exit. Following this line, Ucbasaran, Westhead, Wright &

Flores (2010) consider business failure as an exit or a sale of business not only

because of bankruptcy, liquidation or receivership, but also due to the entrepreneur’s

unmet expectations. Similarly, Ucbasaran et al. (2013, p. 175) define business

failure as “the cessation of involvement in a venture because it has not met a

minimum threshold for economic viability as stipulated by the entrepreneur”. Here the

authors’ focus was on the individual level; the entrepreneur’s experience of failure

and therefore they adopted a broad yet inclusive definition that would capture that.

The way failure is conceptualized impacts the applicability of the examined research

questions and the comparability of results across studies (Jenkins & McKelvie, 2016).

Thus, it has been emphasized that researchers should apply the definition that is

most appropriate for the research question of their studies (Shepherd & Patzelt,

2017).

To serve the purpose of this research which aims to first investigate the causes of

failure from the perspective of Sudanese entrepreneurs, the definition of failure

offered by Ucbasaran et al. (2013) shall be applied. It appears to be appropriate for

the exploratory and qualitative nature of this study as it provides broader view of the

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failure with the entrepreneur being at the centre of focus. Hence, the exploration of

failure shall be carried out at both the objective and subjective individual level criteria

(Jenkins & McKelvie, 2016). The examination will be guided by the personal

performance threshold of the entrepreneur and the personal impact on the

entrepreneur. This is an attempt to understand how entrepreneurs face failure and

their perceptions of this process.

2.4. Attribution Theory

Often linked with social psychology, attribution theory as a concept is the study of

perceived causality, and refers to the perception or reasoning of cause (Kelley &

Michela, 1980). The general viewpoints are that human beings construe behaviour in

relation to its causes and these elucidations have a significant role in defining

response to the behaviour (Kelley & Michela, 1980).

The exploration of failure through attributions instead of causes allows for the topic to

be observed from the perspective of the entrepreneur (Walsh & Cunningham, 2016).

Additionally, it provides a suitable frame to explore the differences in viewpoints on

the subject of causes of failure (Zacharakis et al., 1999). Failure can potentially offer

valuable learning lessons but to enable fruitful learning would necessitate correct

attributions of the causes of failure (Yamakawa, Peng and Deeds 2010, cited in

Walsh & Cunningham, 2016).

Following this logic, the study will apply attribution theory to examine the different

perceptions on entrepreneurial failure from the perspective of both entrepreneurs

whom had experienced failure and entrepreneurs whom had been successful.

2.5. Learning from Entrepreneurial Failure

While failure is often regarded as a negative event, there has been a considerable

amount of literature that concentrated on highlighting the positive outcomes of failure

such as providing valuable learning to the entrepreneurs. Coelho and McClure

(2005) argue that the early acknowledgement of failure enable managerial resources

to be redirected towards ventures that have better likelihoods of success. Cope

(2011) views learning as a process from which the entrepreneurs face the impact of

failure and engage in a recovery and re-emergence processes. He emphasises that

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this in turn enable the entrepreneurs not only to learn about themselves and the

decease of their enterprises but also about the broader environment, the nature of

relationships and the escapade of the entrepreneurial process. His findings propose

that failure can enhance entrepreneurial preparedness for succeeding

entrepreneurial activity.

The social aspect is very relevant to this study considering that entrepreneurial failure

take place within different contexts which are often shaped by different social

attitudes and cultural characteristics. Failure can also impact negatively the personal

and professional relationships of the entrepreneurs. For example Cope (2011) notes

the downfall of marriages consequent to failure. The entrepreneurs can also suffer

from the stigma attached to venture failure. Therefore, how it becomes vital to

understand how entrepreneurs are impacted by the social aspects consequent to the

failure.

Another aspect that was examined was the psychological cost of the failure. The

assessment of literature in this topic proposes mainly two interconnected

psychological costs: emotional and motivational which are related to the

entrepreneurs’ experience of venture failure (Ucbasaran et al., 2013). Although it has

been emphasized repeatedly by scholars that venture failure can provide valuable

opportunities for learning (McGrath, 1999; Singh et al. 2007; Liao et al. 2008), failure

can also triggers negative emotions such as grief, anger, depression (Shepherd,

2003; Cope, 2011) which can hinder learning from failure.

Singh et al. (2007) suggest that while learning and coping from entrepreneurial failure

take place broadly in four aspects of failed entrepreneurs’ lives, including economic,

social, psychological, and physiological, the economic aspect is most prevalent. This

indicates that a more balanced approach on how the other aspects are affected is

needed since entrepreneurial failure affects the entrepreneurs both on the personal

and professional sides. A couple of studies also examined how individuals’

differences can influence the psychological responses to failure. For example,

previous experiences of the entrepreneurs may impact how they respond to business

failure in relation to the psychological cost of failure (Cope, 2011).

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3. Methodology

3.1. Research approach

The chosen method for this study is an exploratory and qualitative approach, as there

is a lack of knowledge on the topic of entrepreneurial failure within the Sudanese

context. The study seeks to explore the factors that cause entrepreneurs to fail in

Sudan. It is worth mentioning that this thesis does not focus on testing the

relationship between two or more predetermined variables nor does it intend to test

theory, but rather aims to explore and develop an in-depth understanding of the

phenomena as perceived by entrepreneurs. Hence, the author aims to analyse and

interpret the stories of failure as told by interviewed entrepreneurs. For this purpose,

the author used a hermeneutical approach to advance meaning through the

interpretation of texts, being here the use of interviews.

3.2. Data Collection

The research design is based on two qualitative methods of data collection. The

primary data which consists of interviews with seven entrepreneurs and the

secondary data taken from published articles, books and online sources. Interviews

are a valuable way to enrich data. Phone interviews were conducted from Germany

with seven Sudanese entrepreneurs, including four that experienced entrepreneurial

failure and three that experience entrepreneurial success. The interviews were

conducted in Arabic—the official language spoken in Sudan—to ensure that

interviewees have a complete understanding of the context and are able to articulate

their perspectives.

The interview questions were formulated as open-ended manner that would be less

intimidating and encouraging for the entrepreneurs, given the sensitivity of the topic.

For example it included questions like “tell me about your experience of

entrepreneurial failure”. After transcribing and recording the interviewees, the author

translated the transcription to English. Furthermore, a hint of bias may become

apparent, particularly since interviews were carried out remotely. Although individual

perspectives are subjective, they are an essential testimony to the entrepreneurial

experience.

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3.3. Case Study as a Strategy

The approach of theory building from case studies can be a useful and relevant

research strategy. Eisenhardt & Graebner (2007, p. 25) elucidate a main ground for

its popularity;

“It is one of the best (if not the best) of the bridges from rich

qualitative evidence to mainstream deductive research. It emphasis

on developing constructs, measures, and testable theoretical

propositions makes inductive case research consistent with the

emphasis on testable theory within mainstream deductive

research”.

Case study research depends on theoretical sampling, which aims to select cases

that are likely to repeat or extend growing theory (Eisenhardt, 1989). Following the

approach of multiple cases, allows for comparison, which can explain whether an

emergent result is merely eccentric to a single case or consistently simulated by a

number of cases (Eisenhardt, 1991). In addition, multiple cases allow for a wider

examination of research questions and theoretical explanations (Eisenhardt &

Graebner, 2007). Hence, following this line of reasoning, the sample selection in this

study was not random but rather focused on selecting specific cases that can be

extended to a broad range of organizations in Sudan.

The number of cases selected was seven, a sample that is often considered to work

well (Eisenhardt, 1989). It was done through the author’s professional network. Semi-

structured interviews were scheduled with seven Sudanese entrepreneurs; four of

them have failed or owned unsuccessful ventures. The remaining interviewees were

considered to be successful entrepreneurs and were asked to provide their

perspectives on the main causes of entrepreneurial failure in Sudan. The author aims

to explore broadly the interviewees' diverse perceptions of entrepreneurial failure. A

comparative study of the interviewed entrepreneurs' perspectives on the main causes

of failure will offer an intimate and nuanced understanding of the topic.

20

The size of the ventures founded by the interviewees ranged from micro to small

sized companies, consisting of about six to fifty employees in total. All the

entrepreneurs have undergraduate degrees, with some having post-graduate

degrees as well. The age of the entrepreneurs ranged between 34 – 60 years old.

The sample included in total six men and one woman. The interviews lasted between

15 to 60 minutes. Due to difficulties associated with COVID-19 travel restrictions, the

author was only able to arrange for phone interviews instead of face-to-face

interviews. Nonetheless, the author believes that it did not affect the quality of

interviews and found the entrepreneurs to be open to sharing their experiences and

stories just as much.

3.4. Data analysis

The author utilised a two-step system to analyse the data. The first step was within

case analysis, which involves detailed descriptions for each case. This method

enables the distinctive features of each case to develop—prior to proceeding—as to

generalize patterns across cases (Eisenhardt, 1989). The second step was to look

for cross case patterns by selecting a number of cases, and comparing similarities

and differences within, then interpreting the data in divergent ways to arrive to a

better understanding.

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4. Analysis (Findings)

This section will present the main findings of the cases that were studied. The

interviewees’ sample included a combination of entrepreneurs whom have

experienced success as well as failure. They were asked to provide their

perspectives on the main causes of failure for entrepreneurs in Sudan. The

participants worked in different industries including; technology (IT, ride sharing app),

education (marketing and consulting), exterior decorative stones business, finance,

and food and beverage.

The goal of the study was to identify the main causes of failure from the perspective

of the entrepreneurs. Internal factors related to the firm, may include poor

management, lack of experience or skills which are under the influence of the

entrepreneur. External factors occur outside the organization and are embedded in

the general environment which the entrepreneurs have no control over.

4.1. Why we failed – as perceived by the entrepreneurs

The sample included four entrepreneurs who were asked to provide their

perspectives about the main factors that contributed to the failure of their ventures.

The main causes of failure were identified based on the ranking given by the

entrepreneurs, including most affecting to least affecting factors. The frequency of

citation was also accounted for, since some of the entrepreneurs did not prioritize the

factors, but mentioned all of them together.

The entrepreneurs attributed the causes of entrepreneurial failure in Sudan to a

combination of internal and external factors, which were mainly (a) economic

situation (b) product/service related issues (c) managerial/organizational skills (d)

lack of funding/financial difficulties and (e) legal factors. In general, the external

factors impact on the failure was cited much more than the internal factors as

attributed by the entrepreneurs.

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Table 1: Characteristics of the failed Entrepreneurs

Ent. Background Sector Duration of the business

1 He was the co-founder for tech company

focusing on University Industrial collaboration

projects (UIC)

Tech 3 years

2 He is the co-founder of company that

specializes in restaurant franchise

management

Food and

Beverage 9 months

3 He was the co-founder of a company

specializing in exterior stone decorations for

buildings

Exterior

decoration 1.5 years

4 He was the founder of a company that

provides financing through installment for

home appliances, and automobiles

Finance 6 years

Table 2: Causes of Failure (failed entrepreneurs)

Factors Type No. of repetition

Economic situation (fluctuations in exchange rates, customers -

low income)

External 4

Product/service issues (lack of availability of material, difficulties

in transportation, lack of service culture, new concept)

External 3

Managerial skills (lack of experience)/organizational issues Internal 2

Lack of funding/financial difficulties (delayed in customers’

payments)

External 2

Legal factors External 2

Lack of support /low demand External 1

Competition External 1

Political factors External 1

Cash flow problems External 1

Complex process Internal 1

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4.2. General Perceptions on the causes of entrepreneurial failure

The second group interviewed included three entrepreneurs who have experienced

success in Sudan and they were asked to give their perspectives on the main causes

of entrepreneurial failure in Sudan.

The results show the main causes of failure a combination of internal and externals

factors as follow (a) economic situation, (b) lack of funding and (c)

managerial/organizational issues

Characteristics of the entrepreneurs

The second group of participants consisted of entrepreneurs who are also co-

founders of their businesses, and are working in different sectors with the age of

business ranging from two to four years.

Table 3: Causes of Failure (successful entrepreneurs)

Factors Type No. of repetition

Lack of funding External 2

Economic situation (fluctuations in exchange rates,

customers - low income)

External 2

Legal factors External 1

Managerial /organizational issues ( Shareholders’

disputes, lack of experience)

Internal 2

Lack of support /low demand External 1

Political factors External 1

Product/service issues (lack of availability of material,

difficulties in transportation, lack of service culture, new

concept)

External 1

Motivation Internal 1

The mindset of the entrepreneur Internal 1

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4.3. Causes of failure

This section will give an overview of the main causes of failure as perceived by the

entrepreneurs. As previously mentioned, the main factors contributing to the failure

included economic situation, product/service related issues,

managerial/organizational challenges and lack of funding and financial difficulties.

Other factors that were frequently discussed by both group as impacting

entrepreneurial failure, include lack of support for the entrepreneurs, the legal

environment and the expectations of the entrepreneur.

a) Economic situation

The influence of the economic crisis was undeniably acknowledged by the majority of

entrepreneurs as a major reason for entrepreneurial failure in Sudan. A number of

entrepreneurs highlighted how their businesses were negatively impacted by the

instability in the foreign currency exchange rates and the devaluation of the

Sudanese pound, especially since their businesses relied on importing materials or

conducting oversea transactions that were necessary for the activities and operations

of their businesses.

One entrepreneur referred to the situation as a case of bad luck, considering it the

main cause for the venture’s failure. The entrepreneur explains:

“At that time, we were unlucky. Because for many years the foreign currency

exchange rate was stable. When we started the business, the fluctuations of foreign

currency rates started …if the exchange rate was stable, the business would have

been successful.”

The political unrest from the recent uprisings in Sudan was also cited as having

affected the entrepreneurs negatively and resulted in interruptions in their business

activities. For instance, the ride sharing business which relies on the use of mobile

application and the availability of internet connection was mentioned to have been

impacted by the internet blackout which lasted for a number of weeks during 2019.

“One of the major factors that impacted companies, especially during the revolution

period, was the instability in the economic situation in Sudan. One time they [the

government] shutdown access to the internet, another time they restore access to the

internet.”

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Another economic factor that was cited by almost half of the entrepreneurs was the

“customers and the market”, taking into account the economic circumstances of the

population. According to the World Bank’s country classification (2019), Sudan's

economy is designated as one of the low income economies. A number of

entrepreneurs emphasised the fragility of the economy, and a constant occupation

with the devaluation of the Sudanese pound. Careful attention was given to the

economic situation, as entrepreneurs tried to offer prices that were considered

reasonable in the market. The entrepreneurs also gave an indication of how their

sales volume was impacted, and spoke of their struggle to strike the right balance

between generating profits, while maintaining their customers base. The interviewees

elaborate on this dilemma:

“Most people do not have high income… so we wanted to make the prices lower.”

“Customers — when you increase your prices they come to you saying everything is

increasing, the petrol, the bread.. we don’t need you.. so our prices should be in

alignment with the current economic situation.”

Other aspects related to the economic scene, include difficulties in retaining

employees, as they are impacted by the economic circumstances and perceived to

seek other employment opportunities that would offer them the slightest improvement

in income.

“It’s very hard to retain staff…forget that your material is getting expensive so you

have to increase your prices, but even your employees…especially in the food

industry…the turnover is very high… no matter what you do.”

The downturn of the economy was the most influencing factor causing failure for

entrepreneurs in Sudan. The uncertainty and constant changes in the market and the

general environment conditions presented many challenges for the entrepreneurs.

For some entrepreneurs, it was not possible to overcome these challenges that

caused them to fail. Whereas other entrepreneurs expressed that they did not see

any point in continuing with their business, due to lack of experience in the sector, as

well as lack of profits. Hence, for some the decision to opt for a venture exit strategy

was perceived as the best option. One entrepreneur concluded: “We decided to close

the business..we did not want to get tired for nothing.”

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b) Product/Service related issues

More than half of the Interviewed entrepreneurs cited challenges related to products

or services offered by their business as the second reason for a failed venture. For

example, problems related to the availability of required material for business

activities, transportation issues and varying costs from one city to another, in addition

to the impact of other external factors, such as weather conditions. Other issues

included are “service” related, the lack of service culture in the food and beverage

sector in Sudan. Lastly, other challenges were mentioned, including introducing new

ideas and concepts to the market, yet perceiving the Sudanese environment as not

easily open to such initiatives. Several entrepreneurs elaborated on this point:

“The ecosystem in Sudan is not supportive of entrepreneurs, especially if it’s an idea

that needs time… all the businesses that succeed here, are the ones that are directly

with customers (B2C) and not business to business (B2B).”

The lack of training and experience in some industries—for example the food and

beverage sector—was perceived as an additional factor contributing to

entrepreneurial failure in Sudan. This was linked directly with the Sudanese

character, which was perceived as lacking a sense of service and the necessary

skills needed to excel in the mentioned sector. One entrepreneur went so far to

conclude that the “..service culture in Sudan… it does not work.” Khattab et al. (2017)

cites managerial capabilities as a major factor for successful businesses in Sudan.

This provides another indication of how managerial skills are regarded as being

important for the success of the entrepreneurs.

Sudan’s weak infrastructure was also cited as an additional challenge. For instance,

it was often difficult to find reliable transportation means from other cities to the

capital city, which impacted employees’ presence at work. One entrepreneur

explained that it was a struggle to secure the required materials for the business

activities, he elaborated:

27

“Sometimes there were external circumstances…for example in the autumn they

were unable to transport the material…that we did not know.”

These factors were considered to have a major role in business failure as attributed

by the entrepreneurs. It touched upon on a number of social and cultural aspects of

the entrepreneurial environment in Sudan as well as the problems related to the

basic infrastructure.

c) Managerial/organizational skills Internal factors cited by the interviewees as causes of entrepreneurial failure are lack

of managerial skills, organizational problems, operation-related issues, lack of clarity

on roles and responsibilities of employees, and misalignment of the viewpoints of the

founders, as well as lack of experience. The entrepreneurs were able to

acknowledge openly their shortcomings through their own reflections. The internal

factors impact on a business’ outcomes can be as significant as the external factors.

Problems related to management, lack of skills or even internal disputes can be

damaging and lead to further negative consequences on businesses. Therefore,

being able to acknowledge the internal causes of failure would enable the

entrepreneurs to reflect and learn from these experiences, particularly since they are

able to influence and control these factors directly.

From the below quote, the entrepreneurs perceived the lack of alignment between

the founders on the strategic direction of the company was a key reason for the

entrepreneurial failure;

“One of our failures is associated to the internal processes. There was a dispute

between the viewpoints of [the founders].”

Lack of industry experience was also cited as an internal impacting factor;

“From a business perspective, it’s a bit tough managing full scale service big

restaurants something that involves service, big spaces, chairs and furniture, indoor

and outdoor. It’s not easy…our culture is not a service culture in terms of employees,

we don’t have a sense of service…we do not know how to smile to customers we do

not know how to sell…”

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d) Finance/Lack of Funding

Finance (including lack of funding/difficulties in obtaining finance) was considered to

be a major factor for failure by a number of entrepreneurs. This finding is consistent

with GEM Sudan (2018) report which cited financial difficulties as a main reason for

entrepreneurial exit in Sudan. Some of the entrepreneurs interviewed felt

handicapped by the shortage of resources due to lack of funding which they felt

obstructed their business growth and its continuity.

“You feel like you want to make many things but at the same time you have very

limited resources which is one of the things that frustrates the entrepreneur”

Additionally, finding an investor that was willing to provide funds was another

challenge mentioned by the entrepreneurs. A detail worth mentioning concerning

investors that emerged from the perspective of some of the entrepreneurs was the

mindset of the investor, who was believed to be incapable of understanding the value

of an idea or a brand (including tech related innovations). Furthermore, the investor

was perceived as motivated by a short term investment perspective “quick return”

rather than providing long term support for the entrepreneur.

“The business that involves ideas needs patience and long investment ... at the end

the [investor] was inpatient and we were not able to move forward because he had a

modest capital and could not continue.”

“Another problem that [provision of] capital here in Sudan, sometimes it needs to

[be related to]something that is tangible, for example if you bring to [the investors]

sesame they get into business with you, but when you bring business related to

intellectual properties and ideas they hesitate to enter into [such businesses].”

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e) The legal factors

The legal environment in Sudan was criticized by almost half of the entrepreneurs

who mentioned the absence of rules and regulations that support the entrepreneurial

environments in terms of policies and exemptions, lack of notification on the constant

changes of the rules and how the current policies are unfit to address the

entrepreneurs’ needs. The world’s bank doing business report (2020) reflects this

weak legal infrastructure, with Sudan standing on the bottom of the rankings in

comparison with the other economies particularly in the areas of starting a business,

paying taxes and getting credit. This implies that entrepreneurs have to go through

complex procedures that are costly and time consuming for them which provides an

additional burden that they have to deal with beside the other challenges they face.

“Policies in Sudan do not support the entrepreneurial scene at all because they are

outdated…people face a lot of challenges not just in registration but also how they go

about their taxes, the rules and laws of the country.”

“You are treated just like any other big organization.”

f) Lack of support for the entrepreneurs

A very important theme that emerged from the interviews was the frustration felt by a

number of the entrepreneurs due to the lack of support from the surrounding

environment including the society (friends and family) and the government which left

some of them feeling “devastated” and “discouraged”. Similarly, Gangi and

Mohammed (2017) note the impact of the Sudanese society in creating poor

entrepreneurial environment in two ways first by the preference of families for their

children to earn education/degrees through schools and universities to secure jobs in

either the public and the private sectors and the second way through the practice of

imitation as a strategy for avoiding risk. This has resulted generally in a society that

does not adapt easily to new ideas, new approaches of doing businesses and hence

this often leaves the entrepreneurs struggling to make it in a hostile and obstructive

environment. As a consequent, this could potentially impact the entrepreneurs

psychologically and influence the outcomes of their businesses.

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To be an entrepreneur in Sudan, one has to have sufficient strength to fight the

negative atmosphere, as one entrepreneur expressed;

“You believe in yourself, you have to support yourself, but this comes on the expense

of your family, you are unable to see them, they start to tell you things that could

psychologically affect you.… you find your friends questioning your [choice] telling

you that it would have been better for you to accept a job [position] for a better salary,

others telling you that you are wasting your time and that what you are doing is

nonsense….you face many negativities negative energy that you need not to give in

to.”

It was also claimed by a number of entrepreneurs how the government does not in

truth appreciate and encourage new ideas, despite many efforts made by

entrepreneurs to implement new ideas tackling real social problems that are existing

in Sudan. One entrepreneur describing his experience with governmental officials;

“The government is not helping, they do not initiate, that was one of the things that

devastated us that we were running after the ministries, the governmental

universities and the interaction was weak.”

g) The expectations of the entrepreneur

One of the internal factors impacting the entrepreneurial failure which was cited more

than once related to the expectations of the entrepreneur who were perceived as

anticipating “quick results” or “quick return” from their entrepreneurial activities. This

is turn can result in the entrepreneur feeling disappointed that he or she had failed.

A new venture especially at the beginning of its establishment might have to deal

with many challenges including being a new comer to the market. Therefore, it is

unlikely that it would be able to generate immediate earnings and develop rapidly.

One entrepreneur explains;

“People think that once they have entered into a project or [business] that they have

become entrepreneurs… that the next day they are able to make profits right away

and that the business will grow quickly.”

Also, having to give up a stable income from a regular job, and moving on to become

an entrepreneur in a volatile and unstable economy made some entrepreneurs

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anxious to succeed, and raised expectations that may not be realized as expressed

in the following quote;

“Here [in Sudan]..we still look at the money more than anything else, if you start with

an idea for six months or a year and it does not generate revenue, it will be

considered as the biggest failure to you..especially if you are moving from one

situation [from being employed] to another[entering the market as an entrepreneur].”

One entrepreneur when asked about the learning outcome from his entrepreneurial

failure, he spoke of the unmet expectations from his business, which consequently

led him to shutdown the company. Similarly, the GEM Sudan report (2018) also cites

low profits as a main reason for business discontinuity in the country. The

interviewee reveals:

“From that experience, I came to realize that I should not get involved in a complex

business with low returns... there are [businesses] that are easier and can generate

higher returns with the lowest effort.”

4.4. Lessons Learned

The entrepreneurs were asked to share what they learned from their entrepreneurial

failure experiences. Their responses as frequently mentioned included the

importance of having a supporting network, the choice of partners, lack of

experience/expertise, and the business model of their companies.

One entrepreneur when reflecting on his own experience mentioned the

psychological impact of failure and how he felt “depressed” when the business made

little gains. The takeaway from that experience was that he would only get involved in

a less risky type of business.

“I learned that I should work in a more guaranteed business …because when I made

enormous efforts, there were only low returns. This led me to feeling depressed.”

A number of entrepreneurs also highlighted the biggest learning lesson for them was

who they chose as a partner or investor, referring to the risk associated with entering

into business with friends “personal relationships”, as well as someone who might

have a different viewpoint on the strategic direction of the company.

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“[I learned] the most important factor is your partner. That means you need to have

an alignment with your partner in your idea for example…with my partner, I was

always thinking long term [perspective], while he was [focusing on] the short term.”

“The first and biggest thing I learned is that [entering into] business with friends is the biggest risk.” Other learning outcomes related to difficulties in establishing successful businesses

in Sudan, include corruption and political factors. These two factors can have a

powerful impact on the companies’ activities. Furthermore, it was indicated the

Sudanese environment generally does not support and adapt to new ideas easily

which ultimately lead to their failure.

“Lesson learned - if you want to do business in Sudan, you need [political] support,

network. The corruption rate is high, and new ideas do not grow in Sudan.”

The previous quote highlights corruption as an existing issue that is impacting

businesses’ activities in Sudan. Similarly, corruption is considered as one of the top

three factors—along with economic uncertainty and political instability—hindering the

development and investment of private sector enterprises in Sudan (The World Bank,

2009).

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5. Discussion

The previous section presented the main findings of the study. This section will

discuss the implications of the results. This study was guided by the main research

question: what are the main factors that cause Sudanese entrepreneurs to fail?

As indicated in the analysis section, the main causes of entrepreneurial failure

involved a combination of internal and external factors. Cited internal factors, include

managerial and organizational issues, as well as the entrepreneur; unrealistic

expectations. The Sudanese economy, product and service issues, lack of finance,

lack of support and the legal environment were some of the reported external factors

impacting start-ups in Sudan.

The study also tried to answer the following question: What are the lessons learned

from entrepreneurial failure as perceived by Sudanese entrepreneurs?

The entrepreneurs offered varying and similar reflections on the learning outcomes

from their failed business experiences. Their responses highlighted several

challenges that have affected their businesses. For example, interviewees cited new

ideas and concepts of businesses are not easily accepted and difficult to implement

within Sudan. Other learning outcomes were noted, including the importance of

having social support and a network, the choice of partners and avoidance of risky

businesses.

5.1. The dominance of the external factors

The results show that entrepreneurs generally attribute the failure of their ventures to

a combination of internal and external factors, with the external factors weighing

more on the entrepreneurial failure. This finding comes in contrast with Zacharakis et

al. (1999) who found that entrepreneurs attributed the causes of their failures to the

internal factors more than external factors. Perhaps this difference can be explained

by looking at the general environment in Sudan. Entrepreneurs had a multiplicity of

external problems that had to be overcome, ranging from economic, political, to legal

aspects that are out of their control. The entrepreneurs considered these conditions

as major factors in business failure. Therefore, it is not surprising that the

entrepreneurs attributed the causes of failure mainly to the external factors. However,

this may also indicate that the entrepreneurs may not recognize or are unaware of

34

their shortcomings. This could have further exacerbated their situation, and likely to

be a direct cause of failure.

In the study, the entrepreneurs tended to attribute external forces as mainly

contributing to their failures, which would indicate a possible bias in their perceptions.

In social psychology, attributions are often thought to be bias or in error. Ross (1977)

refers to the concept of a fundamental attribution error, which is explained by the

people’s tendency to overrate the significance of personal factors and underestimate

the impact of environmental factors when explaining the behaviour of a person. In

other words, people tend to attribute external factors to justify their own

shortcomings, while attributing the shortcomings of other people to internal factors.

However, this study also asked the entrepreneurs who experienced success about

their perceptions on the main causes of entrepreneurial failure in Sudan. The results

showed that they attributed both internal and external factors as causing failure.

Similar to the first group, the citation was much more on the external factors.

Similar to the Sudanese context, Pardo and Alfonso (2016) found that the finance

and organizational/managerial factors were two of the main factors for business

failure in Colombia. However, in this study, these factors did not have the same

priority. Other external factors, such as an unfavorable economic situation and

product/service related issues were considered to have bigger impact on

entrepreneurial failure in Sudan.

The major external causes of failure as attributed by the entrepreneurs include an

unfavourable economic situation, product and service related issues, finance, lack of

support and an inadequate legal environment. Arasti et al. (2014) findings showed

comparable results to the main causes of business failure in Iran. It included

inappropriate policies and economic conditions, and various challenges due to an

unstable economic environment, such as embargoes and high inflation rates. The

findings suggest that Iranian entrepreneurs face many challenges due to the external

environment, ranging from political, legal, economic and cultural factors.

35

The economic circumstances in Sudan have had a significant impact on the

entrepreneurs’ businesses. Most pertinently, the last decade witnessed high levels of

inflation and sharp currency devaluation. Consequently, this affected entrepreneurs

who cited the unstable economic conditions as the main cause of entrepreneurial

failure.

Figure 1: Inflation rates in Sudan from 1980 to 2020

Source: IMF

According to Figure 1, the inflation rate has been rising significantly from 2010

onwards, reaching 81.3 percent by 2020.

How can entrepreneurs operate in a troubled economy and not fail? Liao et al. (2008)

suggests that nascent entrepreneurs can improve their likelihood against business

discontinuance by acquiring resources, in particular financial capital. However, this

may not be easy for entrepreneurs in Sudan. The lack of funding opportunities and

difficulties in accessing finance continues to be a major obstacle for many

entrepreneurs and involuntarily a cause for entrepreneurial failure. Other studies that

investigated the causes of entrepreneurial failure (Bruno et al., 1987; Pardo &

Alfonso; 2016) also highlight finance as a major factor for business failure.

This finding is of relevance for the policy makers who need to formulate appropriate

policies and programs that allow entrepreneurs to acquire necessary resources for

the sustainability of their business.

36

Other external causes related to product/service issues, such as lack of service

culture, difficulties in transportation from one city to another (in the autumn season

for example), and cultural attitudes towards new ideas and concepts. One could

argue that all these challenges could have been tackled internally by the

entrepreneurs. For example, through proper research market, assessing the situation

or testing public appeal of new ideas and concepts. However, it is often difficult for

entrepreneurs to predict the outcomes especially if they are in an experimental stage

in the market. It becomes difficult to accurately evaluate the market particularly in a

volatile environment like Sudan. One entrepreneur explained how the market reality

was completely different from what he had anticipated; “We found that all the market

estimates were incorrect”.

The legal environment was also perceived as weak by almost half of the

entrepreneurs interviewed who referred to the complexity of procedures, inadequacy

of regulations and laws, and lack of transparency. These findings are consistent with

Gangi & Timan (2013) who found that the entrepreneurial environment including the

legal, administrative cultural, social aspects are perceived by entrepreneurs as poor.

However, while in their study the economic aspect was considered to be fair, this

study highlights economic circumstances as unfavorable or harsh as perceived by

the majority of the entrepreneurs.

5.2. The perceptions in comparison

The two groups examined here—the successful and the failed entrepreneurs—

showed similar results, as they tended to attribute entrepreneurial failure mainly to

external factors rather than internal factors. However, they differed in their

prioritization of the factors.

For example, those who failed considered the economic situation, product/service

issues, managerial/organizational challenges, and lack of funding to be the main

causes of failure, respectively. While those who have had successful ventures gave

more weight to the following factors: the economic situation, lack of funding and

managerial/organizational issues in this order.

Overall, the general perceptions tended to attribute a combination of external and

internal causes, with the external factors as the main reasons for the failure. There

37

was no major difference in the perceptions of these entrepreneurs, which may

suggest that these factors are common challenges that Sudanese entrepreneurs face

in the external environment.

5.3. Are the internal factors equally important?

The results of the study show the external factors as having more impact in causing

the entrepreneurial failure. Nevertheless, previous research has highlighted how

internal factors, such as lack of skills (Arasti, 2014) are regarded as a major aspect

for business failure. Unlike mature enterprises, new ventures often fail due to the lack

of general managerial skills (Thornhill & Amit, 2003). In this study, several

entrepreneurs recognized that internal factors like managerial issues, lack of

experience, incoherent internal structure and the competing roles of several

founders, as having impacted the outcomes of their ventures. This shows that they

were able to admit their own mistakes and reflect on the internal influences on their

ventures. As Zacharakis et al. (1999) note in their findings, the high

acknowledgement of entrepreneurs of the internal factors causing their business

failure indicate that they are able to evaluate the situation realistically and not

jumping quickly to blaming external factors. They suggest that as a result, the

entrepreneurs may be more effective in correcting issues, at a minimum in their

future enterprises.

In Sudan, entrepreneurship as a concept is still relatively new and there are no

specialized programs that teach people how to become entrepreneurs. Hence this

finding is of particular interest to the educational institutions, which need to address

the need for educational programs and trainings that are tailored for aspiring and

current entrepreneurs. Programs may focus on equipping them with the necessary

skills, like managerial, project design, and financial skills that would prepare them for

the challenges and demands of launching and running a start-up.

38

5.4. What have the entrepreneurs really learned?

As suggested from previous research, failure can provide valuable learning sources

for the entrepreneurs, and may potentially contribute to future successful ventures.

The study asked the entrepreneurs to share their perceived learning outcomes .The

first group is comprised of those who have experienced entrepreneurial failure. They

gave their reflections on the lessons learned from their different experiences. The

responses varied and reflected the impact of the internal forces as well as the

external forces resulting in the collapse of the venture.

Learning lesson 1 - only enter into guaranteed businesses

This learning outcome refers to how some entrepreneurs in Sudan prefer risk

aversion when it comes to entering into businesses. It is an indication of

entrepreneurs’ future direction who now considers high-risk in business as

unappealing and could yield negative returns. Therefore, many entrepreneurs in

Sudan prefer imitation practices (Gangi & Mohammed, 2017) of other businesses

over innovative ideas. On the one side, this is a good strategy in the face of

uncertainty, but on the other hand, it hinders creativity and innovation in the

entrepreneurial scene within the Sudanese context.

Learning lesson 2 - new ideas or concepts do not grow in Sudan

A number of entrepreneurs said it was difficult to implement unfamiliar or new

concepts in Sudan, and that it needed time to be accepted and implemented.

However, there was no discussion with regards to the general fit and applicability of

new ideas or concepts within the Sudanese environment. However, it might be the

case that some ideas are simply not practical or difficult to implement due to the lack

of resources and inadequacy of the infrastructure in the country.

Learning lesson 3 - the choice of partner and/or investor is important

Some of the entrepreneurs also mentioned how choosing the right partner or investor

was the biggest learning lesson for them. Internal issues that occurred due to

shareholders’ disputes, misalignment of the partners’ views (short term vs. long

terms perspectives) and investors influence in decision making were a direct result of

this lesson. Having gone through such experiences entrepreneurs are likely to reflect

carefully on these choices in the event that they enter into subsequent ventures. This

39

is an important learning outcome, considering that previous research reported

shareholders’ disputes as a cause for business failure and discontinuance.

Learning lesson 4 - entrepreneurs need a network and support to do business in

Sudan

It was also perceived that having a network and political/social support as necessary

for conducting business in Sudan. Corruption is prevalent in the country, and may

impact negatively the outcomes of new businesses. From these reflections, it was

observed that those entrepreneurs who tended to blame mainly external factors

articulated that it was not possible for their ideas to succeed without other favourable

external factors. These factors include culture, economy, politics or network. It was

also perceived that it was better to avoid risky activities and only enter into

guaranteed businesses.

Other entrepreneurs who have attributed both internal and external factors as

causing venture failure showed openness in admitting their own shortcomings, such

as acquiring the appropriate skills, and choosing the right partner and investor.

Yamakawa & Cardon (2015) examined the impact of failure on perceived learning

and found that the internal unstable attributions of failure produce better perceived

learning, while external unstable attributions produce a lesser amount of perceived

learning. Accordingly, this would suggest that the entrepreneurs in this study who

attributed internal factors as causing the failure are likely to learn more than those

who attributed their failure mainly to external factors. It is important to note that this

study did not focus on examining the relationship of failure and perceived learning.

Nevertheless, it was interesting to see how each entrepreneur associated their

experience of failure to their perceived learning outcomes.

5.5. The impact of failure

The existing literature also refers to the social and psychological cost of failure which

can negatively impact the entrepreneurs and thus hinder learning from the failure.

Some entrepreneurs expressed feeling “anxious”, “depressed” and “devastated”

when their businesses collapsed. Similarly, Shepherd (2003) and Cope (2011) note

that failure may triggers negative emotions, such as grief and depression, which in

turn can obstruct learning from the failure.

40

Entrepreneurial failure can ruin previous friendships between partners. These

personal and work-related tensions and disputes consequently were perceived to

have significantly impacted the businesses and contributed to their downfall.

Furthermore, the absence of fixed income as a result of becoming an entrepreneur

was suggested to have applied more pressure on the entrepreneurs, especially if

they are the main providers in their families. This in turn made them more anxious to

succeed quickly. Lastly, the entrepreneurs also felt let down by society due to the

general lack of support for entrepreneurs in the country. This indicates that

entrepreneurs that had short-lived businesses are more likely to become vulnerable

to social stigma, which can arise from business failure.

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6. Conclusion

6.1. Summary of findings and recommendations

“Despite the failure of the experience, in my opinion it succeeded because as a

person with an idea or a message, it is not necessary to reap the reward of the

success, as much as it is necessary that the idea you believed in is accepted and

spreads within the society.”

This quote from one entrepreneur who was part of this study illustrates how

entrepreneurial failure is not necessarily regarded in a negative light and can foster a

positive learning experience that may potentially contribute to future successes. The

objective of this thesis was to investigate the main causes of entrepreneurial failure in

Sudan from the perspectives of the entrepreneurs and contribute to the limited

research carried out in this field with new insights. The main causes of venture failure

included economic instability, product/service related issues,

managerial/organizational challenges and legal factors. Other relevant factors were

lack of funding/financial difficulties and lack of support for the entrepreneur.

The business environment continues to be very challenging for entrepreneurs in

Sudan, as a result of decades of political unrest, international isolation due to

economic/political sanctions and economic downturns. The basic infrastructure

remains underdeveloped with many challenges to name, a few related to electricity,

transportation and education.

The economic situation which was found to have the greatest impact on the

entrepreneurs’ business continuity and growth needs to be addressed by the

government. Problems like high inflation rates, exchange rates fluctuations and the

existence of multiple currency practices. The central bank’s official exchange rate

and parallel market rates increased the risk of corruption by boosting rent-seeking

and excessive speculation, as a result slowing the economy and enabling income

divergence (IMF, 2020). Entrepreneurship can provide a valuable source to tackle

social problems that exist in the society as well as provide means for reducing

poverty, creating employment opportunities and economic development. Several

42

reforms need to be put on the macroeconomic and microeconomic levels that would

also offer support for the entrepreneurial environment.

The second cause of failure is product and service related, and was impacted by

various factors, such as difficulties in securing the material needed for business

activities, difficulties in transportation between different cities in Sudan. Other issues

were cited by the food and beverage entrepreneurs, such as “lack of service culture”,

which was branded as a Sudanese cultural problem. Entrepreneurs in Sudan

continue to operate in a weak and undeveloped infrastructure, which directly affects

their businesses. Government authorities need to improve the general infrastructure

to enable entrepreneurs to develop and sustain their businesses. Moreover,

vocational training initiatives are needed to overcome the lack of skills in certain

sectors, such as the food and beverage sector.

Finance was another major factor considered to cause entrepreneurial failure as

indicated by the findings of the study. Similar findings were also seen in the previous

literature (Pardo & Alfonso, 2016). The lack of funding and difficulties in accessing

finance continues to be a major obstacle for the Sudanese entrepreneurs. According

to GEM Sudan (2018), the country recorded the highest level of informal funding—

mainly from family sources—in its zone, with about 18 percent of the studied adult

population stating that they had operated as informal investors in the previous three

years. While this provides a good indicator for the entrepreneurs who are accessing

support from social channels, the access to formal finance, including banks and

private funding, remains very limited. To enable entrepreneurs to develop and

maintain their businesses in Sudan, policymakers need to improve accessibility of

finance through banks and the private sector. They can also introduce policies and

financing schemes that support micro and small-sized companies, notably in the first

years of their establishment. Microfinance can also offer valuable resources to the

entrepreneurs, provided they are available to access it and benefit from these

resources.

Some of the internal factors that contributed to the failure of entrepreneurs in Sudan,

included lack of knowledge in regards to setting up a sound business model and

formulation of strategy, as well as lack of experience and weak organizational

structure. Timan & Gangi (2015) studied the state of entrepreneurial education in

43

Sudan by examining the five largest public universities in the country. Their results

showed that courses on entrepreneurship are scarce and rarely offered by public

universities in Sudan. Hence, governmental and educational institutions can

influence and enhance knowledge by introducing entrepreneurship as a fundamental

subject in the curriculum of secondary schools and universities.

Based on existing research and the findings of this study, it is apparent how having

the right set of skills and knowledge are important for sustaining and managing

successful businesses. A number of the entrepreneurs in the study expressed their

disappointment in the rejection of new ideas and initiatives, and the lack of support

and encouragement from government officials. Therefore, it is crucial for the

government to foster training and more importantly enhance the overall

entrepreneurial environment in a manner that would encourage creativity and

personal initiatives. The negative social and cultural attitudes towards entrepreneurs

and entrepreneurship cannot be changed without the government making real efforts

and prioritizing entrepreneurship as the way forward to contribute to the development

of economy. By fostering a positive entrepreneurial environment, this could

potentially enable a better involvement from the private sector in encouraging and

supporting the entrepreneurs not only with capital (investments) but also with

mentoring and experience.

Almost half of the entrepreneurs cited the ever-changing laws and regulations as an

instrumental factor in business failure. The legal environment in Sudan is often

characterized by the complexity and bureaucracy in legislation and procedures,

which is an additional burden for entrepreneurs. Policymakers and regulators need to

take into account the needs of the entrepreneurial scene. They ought to formulate

policies and legislation that would ease the burden on entrepreneurs while

accommodating the needs of new ventures. For instance, reducing administrative

costs, transparency in procedures, and simplifying complex procedures for new

businesses.

44

6.2. Practical and theoretical contributions

The objective of this thesis was to provide relevant insights on the topic of

entrepreneurial failure within the Sudanese context. To the author’s knowledge, this

is the first study to explore the causes of venture failure from the perspectives of the

entrepreneurs in Sudan. As seen from the previous literature and the findings of this

thesis, studying business failure can help us not only understand the reasons that

lead entrepreneurs to fail, but also the consequences of that failure on the

entrepreneur. This in turn can provide policymakers and regulators with valuable

insights. It may assist in addressing the gaps that exist in the laws and legislation,

and accordingly formulate appropriate and adequate policies and laws that enable

entrepreneurs to establish flourishing ventures in a sustainable business

environment. For the academic field, the lack of research requires us to continually

explore different ranges of topics within entrepreneurship. Investigating failure

remains a prominent theme considering the high rates of failure for new ventures.

6.3. Suggestions for further research

It is never easy to talk about failure. This study took the first step towards initiating

the discussion on entrepreneurial failure in Sudan. Further studies on the field are

needed to help in understanding how entrepreneurs experience failure, and the

lessons that can be learned from this failure, and most significantly what happens

after the failure. Researchers and academics interested in the field can carry out

further studies to explore the financial, social, psychological and physiological cost of

failure. They may further explore the impact on entrepreneurs, and the available

recovery mechanisms for failed businesses. Due to time constraint and limited

resources, the author primarily focused on conducting a small study that covered

entrepreneurs who were based in the capital city – Khartoum. Other researchers may

carry out studies covering a broader range of cities as well as industries, which would

allow comparability and generalizability of results. Additionally, in Sudan, female

entrepreneurs face many challenges due to societal; attitudes, thus it would be

beneficial utilised a gendered lense. Researchers may gauge how entrepreneurial

failure impacts women and how they experience failure.

45

6.4. Research Limitation

The author is aware of the uncertainty of empirical studies especially that the findings

are based mainly on interviews being the only source of data. The small size of the

studied sample restricts the generalizability of the findings to the whole population of

entrepreneurs in Sudan. Nevertheless, it provided valuable insights that allow us to

develop a broader understanding of failure as a concept through the different lenses

of entrepreneurs. Another limitation experienced by the author is the difficulty in

finding entrepreneurs whom had failed in Sudan and were open to share their

experiences. Reluctance of entrepreneurs to participate in the study can be

explained by the sensitivity of the topic and the reality that unsuccessful stories are

often difficult to share. Similarly, Bruno, Leidecker and Harder (1986) note that one of

the obstacles to researching causes of failure is that the entrepreneurs may be

reluctant to discuss these experiences that are often painful. Nonetheless, those

entrepreneurs who have participated in the interviews showed openness and

willingness to share their stories. Despite these limitations, this humble study hopes

to strike the curiosity and interest of other scholars to conduct further expansive

research on the topic.

46

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