Insolvency of Small Civil Engineering Firms: Critical Strategic Factors

Abstract

Construction industry insolvency studies have failed to stem the industry’s high insolvency tide because many focus on big civil engineering firms (CEF) when over 90% firms in the industry are small or micro (S&M). This study thus set out to uncover insolvency criteria of S&M CEFs and the underlying factors using mixed methods. Using convenience sampling, storytelling method was used to execute interviews of 16 respondents from insolvent firms. Narrative and thematic analysis were used to extract 17 criteria under 2 groups. Criteria were used to formulate questionnaire of which 81 completed copies were received and analysed using Cronbach’s alpha coefficient and relevance index score for reliability and ranking respectively. The five most relevant criteria are: economic recession, immigration, too many new firms springing up, collecting receivables and burden of sustainable construction. The 4 underlying factors established through factor analysis are: market forces, competence-based management, operations efficiency and other management issues and information management. The factors were in line with Mintzberg’s and Porters’ strategy theories. Results demonstrate that insolvency factors affecting big and small CEF can be quite different and sometimes, even opposite. This research will provide a unique resource on the ‘beware’ factors for potential owners of S&M CEF. The criteria are potential variables for insolvency prediction models for S&M CEFs.