Sink or Swim? Impacts of Management Strategies on Small Business Survival and Recovery

Maria I Marshall,Holly L Schrank

doi:10.3390/su12156229

Maria I Marshall, Holly L Schrank

Open Access

https://doi.org/10.3390/su12156229

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Journal: Sustainability	Publication Date: Aug 3, 2020
Citations: 13	License type: CC BY 4.0

Affiliation: Purdue University West Lafayette

Abstract

The rate of small business demise is exacerbated by exogenous events such as natural disasters that threaten even the healthiest business. This study focused on the effects of management strategies used by small business owners affected by a natural disaster and the resulting recovery status eight years after Hurricane Katrina. The results indicate that location, human resource, and financial management decisions affect operating status and recovery. Both pre-and post-disaster strategies and across system exchanges were utilized and predicted survival and recovery, e.g., financial managerial strategies utilized post disaster predicted whether a business would fully recover, but effective overall management strategies differed over time and operating category.

Highlights

Small businesses in the United States are often described as having a large collective impact on the nation’s economy and on new job creation, yet they are vulnerable to many threats
This paper focuses on small businesses that experienced the exogenous shock of Hurricane Katrina
The Heckman model was used to determine if financial and other management strategies were positively associated with business recovery

Summary

Introduction

Small businesses in the United States are often described as having a large collective impact on the nation’s economy and on new job creation, yet they are vulnerable to many threats. Business dynamic statistics from the United States Census Bureau indicate that, after five years, businesses in the retail, finance, and construction industries have survival rates below 40%, while those businesses in other industrial sectors average slightly above 50% [1]. These statistics make clear that significant attrition is normal. Statistics framing demise after natural disasters have been provided by small business administration officials, senators, business organizations, and researchers. These statistics vary widely and the data from which they are derived are rarely mentioned. The point in time when demise is assessed after an adverse event is important because it influences understanding of the true rate of demise

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