The Risk of Growth Failure of the SME Sector Companies Operating in the Shadow Economy

The paper presents issues related to the risk of growth failure of SMEs operating in the shadow economy and discusses determinants and paths of business growth. The participation of companies in the shadow economy affects their operations, and thus the processes of their growth. On the one hand, it stimulates the efficiency of companies while, on the other hand, it increases the risk of failure due to the possibility of overestimating the effects of income x through the inclusion of illusory effects in profitability estimation, which results in the emergence of problems in growth management. An analysis of the reasons behind the risk of growth failure of companies operating in the shadow economy was conducted on the basis of 131 Polish SMEs. The research shows that the risk rises with the increase in the share of the shadow economy in the financing of business growth. The risk of growth failure of companies operating in the shadow economy increases due to errors in management resulting from a lack of competencies and experience of entrepreneurs from the SME sector. It does, however, decrease when the use of an anticipatory strategy of growth, but increases when an ad hoc growth strategy is used.