The causes of small business failure from the perspectives of process management, human resources, and technology adaptation

Abstract

This study explored the root causes of small business failure in Indonesia's manufacturing sector using an integrative framework that combined process management, process innovation, human resource (HR) quality, and technology adaptation. A quantitative explanatory approach with a causal-comparative design was applied, utilizing Structural Equation Modeling-Partial Least Squares (SEM-PLS) to analyze both direct and moderating effects. Data were collected from 100 qualified small business owners through purposive sampling and analyzed using SmartPLS. The findings revealed that process management, process innovation, HR quality, and technology adaptation significantly influenced small business failure. Notably, HR quality moderated the relationship between process management and business resilience. These results highlighted the synergistic impact of technical and human factors in shaping business outcomes. The SEM-PLS-based evaluation model provided practical tools for identifying strategic priorities and improving policy and managerial decisions. Theoretically, this research contributed by applying socio-technical systems theory to small enterprises in a developing country context. It supported the notion that sustainable small business performance requires alignment among human capital development, technological innovation, process optimization, and continuous process innovation. Future research could extend this model to other industrial sectors and regions while incorporating external variables such as government policy and market dynamics.