Insolvency of Small Civil Engineering Firms: Critical Strategic Factors

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% of 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, the 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 a questionnaire, of which 81 completed copies were received and analyzed using Cronbach's alpha coefficient and relevance index score for reliability and ranking, respectively. The five most relevant criteria were economic recession, immigration, too many new firms springing up, collecting receivables, and burden of sustainable construction. The four underlying factors established through factor analysis were market forces, competence-based management, operations efficiency and other management issues, and information management. The factors were in line with Mintzberg's and Porter's strategy theories. The 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 factors that should make potential owners of S&M CEF cautious. The criteria are potential variables for insolvency prediction models for S&M CEFs.