Dynamic capabilities that matter for business failure versus survival

Abstract

Due to the severity and length of the COVID-19 pandemic, some businesses have failed whereas others, including those in the same industry, have survived. Drawing on dynamic capability theory, we explored the dynamic capabilities, whose presence or absence are conditions for business failure or survival. We conducted 16 in-depth semi-structured interviews with owners/executives of firms from the travel and tourism, catering and hospitality, and agricultural export industries in India. Using fuzzy set qualitative comparative analysis (fsQCA) technique, we found three causal configurations for the business failure phenomenon, and two causal configurations for business survival phenomenon. The absence of collaborative capability with key stakeholders was observed as key to business failure, and the absence of leadership adaptive capability and the ability to leverage government support were found in two of the three causal configurations. In contrast, leadership adaptive capability and collaborative capability were present in the two causal configurations for business survival. Contrary to common viewpoints, digital transformation capability was neither sufficient to prevent failure nor necessary to ensure survival. By focusing on firms' dynamic capabilities as the conditions that differentiate business failure from survival, this study advances scholarship, and offers guidance to managers on navigating through a crisis.