Firm Survival Research Articles

An empirical analysis of consumer-unfriendly E-commerce terms of service agreements: Implications for customer satisfaction and business survival

• We use text mining to identify harmful e-commerce terms of service (ToS) clauses. • We present a prototype tool that scans ToS and assigns severity rankings. • We identify the impact of customer unfriendly clauses on business performance. • Businesses with higher market share prefer less consumer-unfriendly ToS terms. • The effect of market share on customer satisfaction is partially mediated by ToS. E-business user agreements are seldom read but almost always accepted by users. We present an in-depth analysis of e-user agreement issues using textual data on Terms of Service (ToS) agreements from more than 250 e-commerce companies. Our text mining analysis identifies several terms in ToS that pose significant risks to consumers. We propose a prototype text mining process that scans ToS agreements on behalf of consumers and assigns an overall severity score based on the potential threats. We supplement this with Latent Semantic Analysis (LSA) for topic modeling in our corpus of ToS documents, to identify user-unfriendly clauses from ToS documents. Next, our empirical analysis reveals three novel findings. First, the presence of hostile clauses in ToS negatively impacts customer satisfaction but is associated with higher survival of firms. Second, firms with higher market share prefer less consumer-unfriendly terms in their ToS. Third, the impact of market share on firm performance is partially mediated by ToS severity. Overall, this study analyzes the linkage between market share, ToS severity, and firm performance, and provides significant insights on ToS policies to IS scholars, legal experts, and firms.

Strategic Management and Firm Survival

Strategic management has been praised for presenting firms with advantages. However, there is still a lack of empirical evidence for its impact on firms in difficult conditions. This study evaluates a unique situation in which firms facing the same external threat could end up differently. The relationships between strategic management and firms’ abilities to survive were investigated through a survey of 67 nickel-mining firms in Sulawesi Island, Indonesia. Each firm’s level in strategic management was measured by a questionnaire, which is based on a two-dimensional model for strategic management maturity comprising process and leadership dimensions. Meanwhile, a firm’s survival ability was assessed in six facets, including the ability to detect a threat, formulate an anticipation plan, implement the plan, maintain operations, maintain performance, and continue to exist in the future. Regression techniques were employed in the analysis. Proof of the positive effect that strategic management has on firms’ survival is delivered as the main result. It is further found that maturity in the strategic management process plays a more dominant role than strategic leadership. The effects of both dimensions in strategic management maturity on each survival ability facet are also explored.

Sunk Costs and Concentration in Homogeneous Product Industries

Research by Pankaj Ghemawat and others in the 1980s focused on sunk cost commitments, which can support entry deterrence. Alternatively, sunk costs can create exit barriers, potentially increasing the number of firms in an industry. This study combines information on cost structure, production capacity, and sales for 31 chemical products to consider factors that determine the number of competitors in a homogeneous product industry. After controlling for market size and cost of entry, the number of producers increased with the ratio of sunk to variable costs. This is consistent with exit barriers, but not with entry deterrence. Excess entry was greater when plants were geographically dispersed, suggesting that fragmentation into submarkets facilitates firm survival when sunk costs are high.

Firm Survival and Gender of Firm Owner in Times of COVID-19: Evidence from 10 European Countries

This paper uses firm level data from World Bank Enterprise surveys conducted in 2019, and COVID-19 follow-up surveys conducted in 2020, in ten European countries to investigate the link between the gender of the firm’s owner and the firm’s survival until 2020. The empirical investigation uses econometric models that control for the firm’s characteristics that are known to be related to firm survival. The estimated effect of female ownership is positive ceteris paribus. Furthermore, the size of this estimated effect can be considered to be large on average. Having a female owner helped firms to survive.

Environmental self-regulation and firm survival: Evidence from China

Environmental self-regulation (ESR) is an increasingly important instrument to solve environmental problems. Although ESR is linked to improved firms' environmental performance, it is unclear whether ESR benefits firms’ long-term survival. We use environmental certifications, an externally certified form of ESR, and operation data of Chinese manufacturing firms from 1999 to 2013 to examine the impact of ESR on firm survival. We find that ESR participation significantly improves firm survival, and this effect is more evident on heavy-polluting firms and non-state-owned firms and in regions and periods with more stringent environmental regulations. Mediating effect analysis shows that this enhanced survival effect is mainly from favorable governmental treatment including lower compliance cost and higher subsidies, instead of from market factors including cost reduction, higher demand, and technology improvement. This study contributes to our understanding of the performance consequences of firm environmental conduct and the underlying mechanisms.

Submarket emergence, customer base expansion and strategic entry timing in the evolution of the German farm tractor industry

AbstractTechnological discontinuities create new submarkets in existing industries, which may favor incumbents or provide opportunities to new entrants. Complementing prior research on the emergence of integrative submarkets that leave the industry’s customer base unchanged, we introduce the notion of additive submarkets, which are characterized by enlarging the focal industry’s customer base and its heterogeneity. Our empirical analysis focuses on how the emergence of an additive submarket after a competence-destroying technological discontinuity affected entry and firm survival in the historical German farm tractor industry. Using propensity score-weighted hazard models to control for the endogeneity of entry timing, we find that diversifying entrants from customer-related industries were more likely to enter and survive after the submarket emerged. We develop a conceptual framework to structure the implications for entry and survival of various types of entrants when technological discontinuities create new integrative or additive submarkets.

Gender Board Composition and Performance in Italian Start-ups

Literature on start-ups has mainly involved functional and education diversity of top teams; gender has been neglected, most likely because of the low presence of women in technological firms. Also, extant research has overlooked the role of female representation in start-ups’ boards, despite boards represent a key piece in the puzzle that enables the functioning and survival of new firms. Building on this gap, we aim to investigate the following research question: are gender-related variables in the board of innovative start-ups correlated with better performance? We employ a novel dataset of 3,257 Italian innovative start-ups founded between 2012 and 2018, and we run eight OLS regressions to estimate performance as a function of measures of female representation. Our results provide evidence of a positive relation of gender-related variables with performance. Specifically, we find that gender diversity is related to an efficient use of assets (ROA), while the shares and the number of females are related to an efficient use of capital (ROE). We also detect a non-linear exponential relation between the number of females in the board and ROE: as more women serve in the board, returns on equity grow more than proportionally. Our paper contributes to the literature on board composition and start-up performance by providing new evidence on the role of female representation.

Newbuilding ship price forecasting by parsimonious intelligent model search engine

Asset prices play a significant role in the financial survival and profitability of ship-owning firms. In a highly volatile shipping market, prices of newbuilding ships must be predicted to detect security shortfalls as well as opportunities for temporal arbitration (gaining on high–low pricing). Accordingly, this paper proposes an improved version of the intelligent model search engine (IMSE) by asynchronous time lag selection. The parsimonious IMSE algorithm comprises the essential components such as input and training data size selection by a grid search procedure. In the initial IMSE algorithm, time-lag (memory size) selection is designed such that a serial cluster of memory groups is assigned synchronously for all inputs. By relaxing of lag structures selection, the proposed algorithm estimates unique lead–lag relations for the input of the intended problem set. An extensive benchmark study with several baseline models and the persistence forecast (Naïve I) is performed to observe the out-of-sample accuracy of the proposed approach. The empirical results indicate that second-hand ship prices, scrap values, and orderbook (no. of orders) have predictive features and are selected by the search engine for two ship sizes. Different lag structures are estimated for each input with asynchronous time-lag selection improvement.

Inter-Organizational Collaboration: Units and Levels of Analysis with Multi-Theory Lenses

Efficient knowledge and information transfer within as well as across organizational boundaries are of a proven importance for survival and growth of firms. At the same time, however, on the one hand, knowledge available within organizations is not always used to its full capacity, at times at the considerable detriment of organizations involved. Furthermore, on the other hand, despite the recognized importance of an efficient interorganizational knowledge transfer, many collaborations have not delivered on their promises. Merges and acquisitions deals, for instance, are prone to fail. The goal of this article is to propose and illustrate a conceptual argument why knowledge and information transfer that crosses departmental and firm boundaries, and in doing so often also domain or disciplinary boundaries, is challenging.

Inside the black box: How business model innovation contributes to digital start-up performance

Business model innovation is critical to firm survival and success. Digital revolution has reshaped value-creation methods in recent years, spawning various novel business models. However, we still have limited understanding of how a start-up's business model innovation efforts translate into superior performance in the digital economy. Drawing on insights from the demand-side perspective, this study disassembles the business model innovation architecture into three elements—value proposition, value creation, and value capture innovation—and investigates how business model innovation contributes to digital start-up performance. Based on a survey of Chinese digital start-ups, we find that value proposition innovation is positively related to digital start-up performance. Moreover, this relationship is mediated by value creation and value capture innovation. This study contributes to business model research by examining the impact mechanism of business model innovation on firm performance and providing new insights into the demand-side perspective of business model innovation.

Role of Institutions: A Case of Plastic Industry Entrepreneur

Entrepreneurial effort depends on self-efficacy. Own skillset is a part of self-efficacy. The present case study brings out the role of ambition, self-efficacy, and attitude towards entrepreneurship in venture formation. The persistency is evidenced when an entrepreneur tried, failed, learnt from mistakes, went back to industry to learn, and attempted again. Beyond the traditional aspects of entrepreneurship, this narrative research points to the role of educational institutes in promoting nascent technology entrepreneurship, the role of financial institutions, and natural calamity among others. The entrepreneur in this case asserted that the early childhood stories of his father’s admiration of entrepreneurs, and the news of entrepreneurial achievements were motivating factors for career choice. Initial failure, subsequent re-learning, institutional support, and continual education are pivots of this research. However, the entrepreneur’s reflection brought out how customers and suppliers try to take advantage of a new firm due to information asymmetry and bargaining power. Though the information asymmetry issue in institutional finance to entrepreneurship is well documented, an adversarial initial relationship among new firm, customers, and suppliers are less researched upon andis an opportunity for future research. Firm survival depends on responding to such challenges of market entry, network-dynamics, and information asymmetry.

Firm survival and location preference: evidence from Mexico city

The aim of this research is to find if there is a relationship between firm location and road class, and whether location decisions regarding road class affect the probability of firm survival. We examine the location of 35 selected types of businesses in Mexico City in four road classes. We develop a location preference coefficient that indicates whether the number of businesses that locate within a road class is above or below the expected number. With this calculation we can not only see what class of road each business type prefers, but also the degree of this preference. We find certain business types to prefer only specific road classes while others have a higher variation in their preference. We then run a logistic regression model to predict firm survival after a 5-year period. We find that location on the road class preferred by the business type to be the variable that most contributes to the probability of firm survival.

The Effect of Technology and Company Characteristics on Firm’s Survival: Case Study of Indonesian Manufacturing Industry

Facing globalization and industrial revolution 4.0 requires companies to continue innovation to maintain their existences. Innovation can be carried out well if the company can absorb and apply the latest technology to increase the efficiency of its business. Firms that are unable to adapt to technology will not be able to compete with their counterparts. Therefore, this research was conducted to see the effect of technology, the firm's characteristics (size and location), and productivity (productivity and company profit) on the firm's survival. Using logistic regression, this study shows that technology, the firm's size, and productivity have a significant positive effect on the firm's survival. The location has a significant negative impact on the firm's survival, and profit does not significantly affect the firm's survival. The Hosmer and Lemeshow Test show that the model used in this study is fit for estimating all variables.

Strategic flexibility or persistence? Examining the survival path of export enterprises under COVID-19

PurposeThe rising uncertainties in the macroeconomic environment exacerbate the challenges firms face in the export market. This study aims to explore which strategy is suitable for export enterprises to develop sustainably under COVID-19.Design/methodology/approachBased on the sample data of China’s A-stock listed manufacturing firms from 2010 to 2020, this study applies a survival analysis method to explore the impact of strategic flexibility on export firm survival. Furthermore, this study uses the difference-in-difference model to test the relationship between strategic flexibility and firms’ profits in the context of the pandemic.FindingsThe results show that strategic flexibility can increase firms’ survival time, improving dynamic production and innovation capabilities, which is favorable for their sustainable development. Meanwhile, after the spread of COVID-19, firms with strategic flexibility have higher profits than those without. This influence mechanism mainly involves exploring new markets that can improve the company revenue and the coordination capabilities of the supply chain; this reduces corporate costs.Originality/valueThis study expands relevant research on the factors affecting the survival of export enterprises and supplements research on the economic consequences of firms’ strategic flexibility; this also enriches the dynamic capability theory. Additionally, it provides important implications for firms to enhance strategic flexibility and recommends government implementation of policies that encourage the domestic sales of commodities originally produced for exports under COVID-19.

Factors Affecting Survival of New Firms in the Financial Crisis: the Role of the Local Milieu

This paper investigates how the long-lasting financial crisis is affecting the survival of nascent firms. The target of this research is a sample of 64 firms that benefit from the interaction with a high-technology innovation cluster located in Barcelona (Spain). A logistic regression analysis is conducted to predict survival using a wide set of variables as predictors. The born-global and high productivity ICT firms show the best prediction of success. Financial leverage has played also a critical role in the evolution of businesses whereas milieu effects have been insufficient to overcome the difficulties of financial crisis.

Determinants of SMEs liquidation: board heterogeneity and applicability of survival models

PurposeAs small and medium-size enterprises (SMEs) rely on board heterogeneity to raise capital and establish credit relationships with suppliers, it is crucial to investigate the board heterogeneity effect on their survival. In this study, the first research objective is to provide further insights on the discriminatory power of survival approaches, specifically on semiparametric approaches in survival analysis that take into consideration both fixed and time-varying covariates. The second objective is to examine the relationship between board size and SME liquidation by using resource-based theories that focus on measuring board heterogeneity through board size.Design/methodology/approachThis paper uses survival approaches for modelling SMEs survival by examining the survival of more than 68,000 SMEs in the UK covering the before, onset and post 2008 crisis periods and with firms’ demographic characteristics and financial indicators. Survival analysis is effective to examine multiple causes of default/failure and how do particular circumstances or characteristics increase or decrease the probability of survival. Survival analysis brings more advantages than linear-based regression approaches by effectively handling the censoring of observations.FindingsMotivated by resource-based theories, the authors find that the likelihood of a firm being liquidated robustly increases with a reduction in its board heterogeneity measured through board size. This finding is held under non-parametric, parametric, and semiparametric approaches using survival analysis. The research shows better causal explanation and discriminatory power on using the semiparametric-based survival analysis approach considering both fixed and time-varying covariates.Practical implicationsThis study demonstrates the better performance and causal explanation of the survival model using time-varying covariates compared with those using fixed covariates. In addition, the authors delve into board heterogeneity, measuring through the board size to investigate how the number of board directors affects the firm liquidation, it is also a factor worth considering when a small and medium firm is forming its board.Originality/valueThis research investigates the board heterogeneity effect on firm survival using survival analysis approaches. The authors contribute to the knowledge on board heterogeneity of SMEs. Specifically, the size of more than three directors could help reduce SMEs liquidation risk. This result gives a recommendation to firms or start-ups when forming their director board. This research also provides further insights on the applicability of survival models with unique UK SMEs data covering the before, onset and post 2008 crisis periods.

Determinants of Foreign-Owned Firms Survival in Iran

Determinants of Foreign-Owned Firms Survival in Iran

Bankruptcy costs and the design of preventive restructuring procedures

A European directive requires Member States to give firms access to preventive restructuring procedures. This paper assesses the benefits of having a procedure that is distinct from that for insolvent firms. It is based on the French experience, where a preventive procedure has coexisted alongside the more common restructuring procedure since 2006. The spatial and temporal heterogeneity of the commercial courts’ decisions allows the identification of the causal impact of the conversion from the preventive procedure to the common one on the firm’s survival chances. Using an (almost) exhaustive sample of preventive bankruptcy filings over 2010–2016, we show that conversion reduces the probability of firm survival by 50 percentage points, which corresponds to indirect bankruptcy costs of around 20% of the firm’s assets. Our interpretation is that the low restructuring rate under the common bankruptcy procedure may alarm some of the firm’s stakeholders, especially its customers. This in turn aggravates the firm’s difficulties and reduces its chances of restructuring under the common procedure. We provide some empirical evidence to support this interpretation. A distinct preventive procedure helps prevent this spiral.

Export margins and survival: A firm‐level analysis using Kenyan data

AbstractThis study uses annual customs transaction data (HS six‐digit) for the period 2006–2018 to analyse the impact of average tariffs on the export sales, margins and survival of firms in Kenya. Results from the fixed‐effects regression model reveal that a 1% increase in tariffs reduces exports by 0.181% and the intensive margin by 0.183% but does not affect the extensive margin. Meanwhile, the cloglog fixed‐effects duration model reveals that a 1% increase in tariffs reduces export survival by 2.7%. This suggests that cutting tariffs, possibly through trade agreements, can help firms and countries improve their export performance.

R&D, innovation and firm survival in Chinese manufacturing, 2000\u20132006

This paper examines whether Chinese manufacturing firms survive longer if they innovate. More particularly, it focuses on whether R&D has a greater effect on firm survival than new product innovations. It compares dichotomous and continuous measures of R&D and innovation output, various duration models, heterogeneity in the effects of innovation depending on the industrial environment, and it examines whether risk modifies the effect of innovation on the hazard rate. The analysis is based on data from the National Bureau of Statistics of China, including over 100,000 firms in each year over the period 1999–2006 from all provinces and manufacturing industries in China. It is found that both R&D and product innovation, be it in terms of incidence or intensities, increase the chance of firm survival. As opposed to previous studies, the results indicate that R&D has a greater marginal effect on survival than innovation output and that various measures of risk actually increase the effect of R&D/innovation on survival.