Reframing Small and Medium-Sized Enterprise Failure Through a Sustainability Lens: An Integrative Review of Survival Barriers in Developing Economies

Abstract

Small and medium-sized enterprises, including micro-enterprises in developing economies, play a critical role in employment creation, poverty reduction, innovation, and economic resilience, yet failure rates remain high, particularly among young and resource-constrained firms. Scholarship and policy interventions often attribute failure mainly to limited finances. This integrative review argues that finance is important but insufficient as a stand-alone explanation. Grounded in Sustainability Theory and Institutional Theory and informed by dynamic capabilities thinking, it synthesizes peer-reviewed literature identified within a 1 January 2015–30 March 2026 eligibility window. A structured search, screening process, quality appraisal, and thematic synthesis identified seven interrelated barriers: financial constraints; human capital and managerial capability deficits; weak digital readiness; formal and informal institutional constraints; limited innovation and adaptive capacity; fragmented entrepreneurial ecosystems and social capital; and weak sustainability orientation. These barriers accumulate through interactions among enterprise capabilities, institutional conditions, and ecosystem support. The proposed Sustainability-Oriented SME Survival Framework conceptualizes survival as the dynamic outcome of micro-level firm capabilities, meso-level ecosystem resources, and macro-level institutional environments. It reframes enterprise failure as a multidimensional sustainability challenge and provides a basis for integrated policy, practice, and future empirical research.