Firm survival during economic downturns: is selection based on cleansing or skill accumulation?

Recessions are complex events that create perturbed and hostile business environments. When faced with such event, firm survival depends only limitedly on production efficiency. Rather, it depends on the skills and ability to cope with such complexity, which is itself a result of the firm’s corporate strategy. In particular, we expect firms adopting a corporate strategy that makes relatively large (little) use of skills and capabilities to deal with environmental complexity to be less (more) likely to exit during a downturn than firms that do not. We test these hypotheses on the whole population of Italian manufacturing corporations using an open panel that covers the period 2001-2013. The results provide strong support for our hypotheses. Managerial and policy implications are discussed.

With A. Arrighetti and E. Bartoloni. Economics Department Working Paper – University of Parma2018-EP04 (submitted)

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