The purpose of this paper is to evaluate the contribution of location (geographical concentration) and firm structure (age and subsector) to the risk of business failure.
The Markov's regression analysis was made for a sample of over 11,700 Spanish textile‐clothing firms.
The results obtained from the analysis suggest that the risk of business failure is increased by some risk factors relative to the structural characteristics of the firms (younger firms and specialization in low‐tech activities), and under determined locational circumstances.
Our conclusions have been obtained starting from a sample of manufacturing firms in the Spanish textile sector. An extension of this work would be to test its robustness in other countries (for example, Italy or Portugal) and/or for other industries such as footwear and furniture.
Explaining the different levels of risk business failure shown by firms in an industry.
Work that has studied the failure of the textile firms within this location‐subsector relationship is still scarce. Given that the viability of clusters and of European textile have been put into question, our work evidences that the risk of failure related to the firm's location and structure needs to be tested jointly, so that the way in which the firm addresses environmental changes can be appraised.
