Toward a Construct of Dynamic Capabilities Malfunction: Insights from Failed Chinese Entrepreneurs

This paper explores the processes and mechanisms of business failure in emerging economies. Drawing from the experiences of 50 failed entrepreneurs in China, we developed the concept of dynamic capabilities malfunction (DCM) to explain how business failure can stem from maladaptive, misallocation of attention and internal deficiencies. Our phase model explicates how exogenous and endogenous factors can interplay to contribute to DCM that ultimately led to the business closures. Another unexpected finding was that the failure occurred during the process of business transition. The implications for business failure research in emerging markets are discussed.