Firm Survival Research Articles

The influence of complexity, uncertainty, and munificence on long‐term organizational resilience to natural disasters

AbstractThe turbulent conditions of the external environment have placed unprecedented pressure on firms, drawing management scholars' attention to organizational resilience. This research aims to study if complexity, uncertainty, and munificence influence organizational resilience in terms of long‐term firm survival. We performed a binary logistic regression using a database of 1,849 Italian joint‐stock firms between 2014 and 2020, of which 89 received public funds as compensation for damages caused by natural disasters. We found that munificence in the context where firms operate is likely to increase their survival in the long term compared to the peers together with turnover, however, context complexity and uncertainty have not been found significant. The results shed light on the role of the context as an antecedent of organizational resilience.

Sexual orientation, entrepreneurship, and firm survival

AbstractWe provide new evidence on sexual orientation, entrepreneurship, and firm survival using Swedish population register data linked to business registry data from 1995 to 2020. Over this period, we study over 19,000 individuals who ever entered a legal same-sex union and compare their entrepreneurship and firm level outcomes with individuals exclusively in different-sex unions. We find that sexual minority men are 7.8% less likely than comparable heterosexual men to be entrepreneurs, while sexual minority women are 4.8% more likely than comparable heterosexual women to be entrepreneurs. Both differences are statistically significant. We also provide the first evidence regarding the survival of sexual minority founded firms compared to firms founded by heterosexual individuals. Our results show that firms founded by sexual minority women fail more quickly than observably similar firms founded by heterosexual women, with no significant survival difference observed for sexual minority men. We explore the role of several external and internal factors that may explain these underlying patterns and find that lack of a ‘trapped market’ may contribute to the higher failure rate of firms founded by sexual minority women. We also find suggestive support for a role of romantic partners in explaining differences in firm survival experienced by sexual minority women compared to heterosexual women.

Capital Structure and Its Effect on Firms Value and Competitiveness in the Market: The BBBY Example

After covid-19, almost every industry is competitive. Choosing an optimal capital structure can directly determine a firms survival. This paper mainly investigates how capital structure impacts a firms enterprise value and its competitiveness in an industry, focusing on Bed Bath & Beyond (BBBY) as a case study. This paper mainly integrates insights from different economic theories and other researchers empirical research results to analyze how BBBYs conservative capital structure characterized by substantial cash holdings and minimal debt affects its firm value and competitiveness stance. The finding suggests that even though BBBYs conservative capital structure (holding large amounts of cash and almost no debt) ensures stability, it potentially reduces its firm's value and limits market responsiveness for three reasons. First, holding large cash is wasteful and has a large opportunity cost. Second, having no debt would lose the opportunity of taking advantage of the tax benefit that debt brings. Third, the conservative structure would potentially cause shareholders dissatisfaction. And increasing a reasonable amount of debt and controlling cash holding can enhance BBBYs strategic flexibility and competitiveness edge.

Balancing customer and employee orientations: impact on financial distress and firm value

PurposeThis paper investigates the effect of balanced orientation (BO) toward customers and employees on financial distress and firm valuation. Rooted in stakeholder theory and the attention-based theory of firms, the study aims to understand how a balanced synthesis of employee orientation (EO) and customer orientation (CO) influences the long-term market performance and survivability of firms, particularly in the context of emerging markets.Design/methodology/approachA panel dataset of the top 500 firms listed on the National Stock Exchange of India was analyzed using fixed-effect panel models with robust estimators. The Heckman procedure was employed to address selection bias. Financial data were sourced from the CMIE Prowess database and balanced orientation data were extracted from the annual letters to shareholders.FindingsThe study finds that a balanced approach to EO and CO significantly lowers bankruptcy risk and increases firm valuation. Contrary to the traditional dichotomy of EO and CO, BO emerges as a key driver in reducing financial distress and enhancing long-term market performance. Firms embracing multiple strategic orientations outperform those solely focused on customer orientation.Practical implicationsFor emerging market firms facing resource constraints, developing BO is challenging but crucial. This study suggests adopting a sequential or alternating approach to developing EO and CO, which can alleviate bankruptcy risk and improve market valuation even in competitive environments.Originality/valueThis paper contributes to the existing literature by empirically demonstrating the significance of BO in emerging markets. It offers a novel perspective on strategic management, highlighting the importance of balancing customer and employee needs, especially in resource-constrained environments.

Technology acquisitions and investor expectations: Reputation and expectancy violation perspectives

AbstractEmploying the organizational reputation lens and expectancy violation theory (EVT), I examine how financial market investors (investors) affect the technology acquisition activity and the likelihood of survival of firms facing technological change. I theorize that when a firm has a growth reputation, that is, investors expect revenue growth in future periods, the likelihood of making an acquisition will increase in anticipation of a positive expectancy violation on the part of investors. In contrast, for a firm that has an income reputation, that is, investors expect shareholder returns in future periods, the likelihood of making an acquisition will decrease in avoidance of a negative expectancy violation on the part of investors. I predict a novel moderating effect of investor expectations—a firm's acquisition activity will exert a stronger positive effect on its likelihood of surviving technological change when investor expectations are growth‐oriented, that is, when there is a positive expectancy violation. Using a multi‐industry sample of industry convergence, a salient form of technological change, I find support for my theoretical predictions. I advance research that examines the reactions of investors to firm strategies during technological change to the domain of technology acquisitions, a salient strategic decision. I also expand the predictive utility of the reputation lens and EVT to the context of firm survival during technological change.

Do Bank Governance Mechanisms and Financial Report Lag Affect Audit Quality?

ABSTRACT In the aftermath of banking failures in Africa, the survival of firms has thus been placed with the application of good corporate governance practice and the oversight role of internal and external auditors. This study examines whether audit quality is related to corporate board of directors and financial reporting timeliness in the context of developing countries. Using sample data from 21 universal banks in Ghana and 31 commercial banks in Kenya for the periods 2010 to 2019. The study employs the Generalized Least Square(GLS), using fixed effect to estimate the relationships. The empirical results document that board size, average 9, and board independence, 59% on average, increase audit quality in Africa. However, the relationship between board gender and audit quality is not significant. Financial report lag is not significant to audit quality in Africa. However, financial report lag in Kenya is negative and significant to quality audit. Our findings recommend that commercial banks in Africa should implement policies that would increase the size of their boards and the number of independent directors to enhance maximum benefits from good corporate governance practices.

Nexus between Competitive Business Strategy and Firm Performance: Moderating Effect of Competitive Intensity

ABSTRACT Business strategy literature argues that firm survival and growth in any competitive environment depend on the adaptation of suitable competitive business strategies. Despite the growing interest in strategic management within the fish farming industry, there is a notable lack of empirical evidence exploring how the competitive environment influences companies’ business strategy and performance. This paper examines the direct effect of competitive strategy and the moderating effect of competitive intensity on business strategy-performance relationship. Using hierarchical regression to analyze 306 samples gathered from fish farming firms of south-Benin, empirical evidence shows that competitive strategy including cost-leadership, and both product quality and marketing differentiation strategies impact positively firm financial performance. This research highlights the relative importance of product quality differentiation strategy. In addition, findings indicate that competitive intensity structure contribute to firm success. Surprisingly, findings show that competitive intensity does not significantly moderate the effect of cost-leadership and product differentiation strategies. Besides, the effect of marketing strategy on firm performance becomes more negative under high competition in the domestic market. Study recommends that firms should gain organizational economic outcomes by pursuing cost-leadership strategy and product differentiation strategy whatever competitive intensity states in the domestic market of fish farming.

Firms’ innovation and export survival in a Crisis

ABSTRACT Firms pay sunk costs to enter the export market. However, some firms fail to continue exporting despite paying the high sunk costs. The existing literature has not broadly explored such export market survival for firms, considering their level of innovation. Thus, this study investigates the effects of innovation on firms’ export market survival, using a panel dataset of South Korean manufacturing firms from 2006 to 2019. Adopting a discrete-time hazard model, this study uses patents for measuring innovation and considers the financial crisis period. The study finds that firms with higher innovation levels have lower hazard rates in the export market, implying a higher survival rate. Furthermore, a nonlinear relationship between innovation and export market survival demonstrates diminishing returns to innovation. Innovation is critical to firms’ export market survival, especially during the global financial crisis. Particularly, innovation during the global financial crisis helps high–medium technology firms survive in the export market. These empirical findings suggest that innovation is likely to increase the competitiveness of firms’ products and support their survival in the export market, even during the crisis period.

Firm survivability during long-term disruptions: an adaptation-based view

Purpose The COVID-19 pandemic showed that preestablished contingency plans and resilience practices were insufficient to cope with long-term and global disruptions. Companies thus struggled to develop capabilities that ensure their survivability during similar crises. Building on the adaptation-based view (ABV) of supply chain resilience, this study aims to offer an in-depth perspective on survivability in supply chains (SCs). Design/methodology/approach The paper empirically tests related relationships between adaptation capabilities and practices that ensure operational continuity. Responses from 252 organisations were collected and analysed using partial least squares structural equation modelling. Findings The results empirically support the ABV’s theoretical propositions and assess the possibilities of intertwining, digitalisation, a circular economy and maturity for the survivability of SCs. Research limitations/implications The derived insights are attractive for managers and researchers to foster supply chain survivability and contribute to the increasing efforts of middle-range theorising in logistics and supply chain management research. Originality/value To the best of the authors’ knowledge, this study is one of the first studies to define factors enhancing the survivability of SCs through the lens of the ABV.

A blueprint for success? Exploring business models of additive manufacturing ventures

Additive Manufacturing (AM) was expected to be the next great technological revolution, yet the predicted market growth has fallen short by 40%. Using a proprietary, cross-sectional data set of 350 ventures in the AM field founded between 2000 and 2017, this study analyses AM companies from a business model perspective. Specifically, we explore which value delivery and value capture mechanisms are decisive for AM venture success, measured via their operational and ownership state. We reveal that targeting the B2B market and selling via partner networks significantly increases firm survival likelihood. Further, applying a recurring revenue model increases the likelihood of an IPO. Our main contributions are two-fold: first, our research complements the business model literature by evaluating value delivery and capture in the AM entrepreneurial space, revealing that customer segments, sales channels, and revenue models are key to venture success. Second, we provide business model design guidelines to entrepreneurs as well venture capitalists in the AM field.

Digital Product Innovation Within Family Firms: A Construal Level Perspective

Digital product innovation (DPI) is critical for the survival of firms, especially those operating in traditional industrial-age industries. While research has started to investigate digital innovation in family firms (FFs) considering them as a monolithic group, we still lack a more nuanced perspective that considers heterogeneity among FFs with respect to DPI and what drives such variance. Drawing on construal level theory to explain the risk behavior and goal time horizon of FF owner-managers, we propose and find that the presence of later family generations in control positively influences DPI in FFs, while the presence of a family CEO is detrimental to DPI. Furthermore, we propose that these relationships are moderated by the size of the top management team (TMT), finding that a larger TMT weakens the positive relationship between later generations in control and DPI. We base our analysis on a longitudinal sample of 103 FFs in the automotive, industrial engineering, and pharmaceutical sectors observed from 2013 to 2020. This first empirical study applying construal level theory to the family business literature has important implications for the FF digital innovation literature and for FF owner-managers interested in achieving DPI.

When Does Real Options Reasoning Benefit Firm Survival? Boundary Condition of Imitation Peopensity

When Does Real Options Reasoning Benefit Firm Survival? Boundary Condition of Imitation Peopensity

Listed founding family firms and labor cost stickiness#

AbstractDoes founding family control affect labor cost stickiness? Theoretically, labor cost stickiness is a double‐sided sword: While it can be interpreted as long‐term commitment to employees, it increases operating leverage, reduces operating performance, and thus jeopardizes long‐term firm survival. Empirically, we find that—consistent with socioemotional wealth theory suggesting that founding family firms are more employee oriented—founding family firms exhibit greater labor costs stickiness. The pattern is more pronounced in industries with high labor turnover and high labor intensity. Furthermore, we find that abnormal high labor cost stickiness in family firms reduces profitability and non‐labor investments.

Determinants of New Venture Survival: A Case Study of Startups in Thailand

New ventures are a crucial engine of national economic growth. However, the statistics show that only 10% of total new ventures survive more than five years and continue business operations. The high number of failed startups impacts the economic system (e.g., increasing the unemployment rate). Crucially, many articles have pinpointed the antecedent factors of failure and identified those leading to the survival of new firms, but fewer research studies exist in the context of Thailand. There has been a call for future research extending beyond Western countries. Therefore, this study aims to investigate the determinants of new venture survival in Thailand. Through a qualitative research approach, data were collected via online interviews with startup managers, observations, and document analysis. There were 31 participants in this study. The external, internal, and individual determinants consisted of 18 themes affecting new venture survival in Thailand.

Environmental, Social, and Governance Information Rating and Firm Uncertainty Perception, Evidence from China Listed Firms

Measuring firm value from an environmental, social, and governance perspective is a core concept of ESG (Environmental, Social, and Governance), which contributes to the sustainable growth of firms. This paper aims to investigate the relationship between firms’ ESG performance and perceived economic uncertainty. Using a database of Chinese listed firms from 2011 to 2020, we find that firms with a good ESG performance are better able to resist changes in the external economic environment in the ESG rating system which still holds after a series of robustness tests and a discussion of endogeneity. The reason for this is that the ESG rating system better reduces information uncertainty between firms and the market, which allows firms to better focus on improving their technological and profit levels. In addition, companies with good ESG performance can provide more returns to investors. Our results highlight the necessity of aligning the interests between superior and subordinate governments and the importance of the supervision of superior governments in environmental decentralization. Our findings highlight the role of information communication in the market, especially in developing countries with imperfect information disclosure. It is all the more important to reduce information uncertainty between firms and other market players through mechanism building to achieve the long-term survival of quality firms.

Bank capital requirements and risk-taking: Evidence from basel III

We study the effects of both tighter and looser bank capital requirements on bank risk-taking. We exploit credit register data matched with firm and bank level data in conjunction with changes in capital requirements stemming from Basel III, including the introduction of a SME supporting bank capital factor in the European Union. We find that tighter capital requirements reduce the supply of bank credit to firms, while looser capital requirements mitigate the credit supply effects of increasing capital. Importantly, at the loan level (credit supply), banks more affected by capital requirements change less the supply of credit to riskier than to safer firms, and these asymmetric effects occur for both the tightening and the loosening of bank capital requirements. Finally, these effects are also important at the firm-level for total credit availability and for firm survival. Interestingly, our results suggest that those banks most impacted by the tighter Basel III capital requirements prioritize credit among ex-ante riskier firms to avoid their closure, consistent with loan evergreening.

Global Value Chain Participation and Firm Exit During COVID‐19: Evidence from Emerging Countries

This paper uncovers the nexus between global value chain participation and firm exit during COVID‐19 using merged data from World Bank Enterprises Survey and the Enterprise Survey Follow‐Up on COVID‐19. Empirical results suggest that participation in global value chain could positively extend firm survival and is robust to several specifications, including alternative measures of firm exit and global value chain participation. Further analysis indicates that global value chain participation helps a firm to improve productivity, enhance bargaining power, and mitigate financial constraints, thereby lifting the firm survival. Our paper contributes to understanding how global value chain participation influences firm exit, suggesting several policy and managerial implications.

Access to credit and firm survival during a crisis: The case of zero-bank-debt firms

Before the Covid-19 crisis, zero-bank-debt firms, especially risky ones, faced, due to their lack of credit history, more difficult access to bank loans than firms which previously had bank debt. These credit constraints were tightened by the Covid shock, irrespective of firms’ risk, arguably because of increased information asymmetries during a period of high macroeconomic uncertainty. Zero-bank-debt firms, even those which were safe and profitable, were also far more likely to leave the market during the pandemic than firms which previously had bank debt. However, those zero-bank-debt firms that did obtain new credit reduced their probability of exit.

Innovation strategies and firm performance

Innovation is often seen as crucial for firm survival and as a way for firms to differentiate themselves from their rivals. However, innovation studies are vague about the actual importance of different innovation strategies. In this study, we distinguish between pure product, process, organizational, and marketing innovations and their combinations. We use a (balanced) panel data set with more than 15,000 firm-year observations for manufacturing firms to analyze the performance of firms with different innovation strategies. Additionally, we investigate from a societal perspective whether innovation facilitates less efficient firms to catch up, or whether firms already utilizing best practices are the main beneficiaries. Using Data Envelopment Analysis (DEA), we find the highest increase in firms’ performance among the firms with innovation strategies that combine product innovation with other innovation types. This finding applies to both the short and the longer term. We also conclude that catch-up is strongest among the firms adopting pure process innovation, whereas the other innovation strategies are primarily associated with frontiers shifts.

Demographic Origins of the Start-up Deficit

We propose a simple explanation for the long-run decline in the US start-up rate. It originates from a slowdown in labor supply growth since the late 1970s, largely predetermined by demographics. This channel can explain roughly half of the decline and why incumbent firm survival and average growth over the life cycle have changed little. We show these results in a standard model of firm dynamics and test the mechanism using cross-state variation in labor supply growth. Finally, we show that a longer entry rate series imputed using historical establishment tabulations rises over the 1960s–1970s period of accelerating labor force growth. (JEL D22, D25, E24, J11, J22, J23, M11)