Recession and firm survival: is selection based on cleansing or skill accumulation?

Recessions are complex events that create highly unpredictable and unstable business environments. When faced with such events, firm survival depends only limitedly on production efficiency. Rather, it depends on the skills and ability to cope with such complexity. In particular, we expect firms ado...

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Bibliographic Details
Published in:Small business economics 2021-12, Vol.57 (4), p.1893-1914
Main Authors: Bartoloni, Eleonora, Arrighetti, Alessandro, Landini, Fabio
Format: Article
Language:English
Subjects:
Accumulation
Business and Management
Companies
Entrepreneurship
Industrial Organization
Management
Microeconomics
Recessions
Skill development
Skills
Small business
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Summary:Recessions are complex events that create highly unpredictable and unstable business environments. When faced with such events, firm survival depends only limitedly on production efficiency. Rather, it depends on the skills and ability to cope with such complexity. In particular, we expect firms adopting a corporate strategy that makes relatively large use of skills and capabilities to deal with environmental complexity to be less likely to exit during a downturn than firms that do not. We test this hypothesis 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 in the full sample and in the subsamples of small firms, thus suggesting that skill development can successfully empower smaller and more vulnerable firms. Managerial and policy implications are discussed.
ISSN:0921-898X
1573-0913
DOI:10.1007/s11187-020-00378-0