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

Eleonora Bartoloni, Alessandro Arrighetti and Fabio Landini
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Fabio Landini: University of Parma

Small Business Economics, 2021, vol. 57, issue 4, No 15, 1893-1914

Abstract: Abstract 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.

Keywords: Firm survival; Corporate strategy; Recession; Cleansing; Skill accumulation (search for similar items in EconPapers)
JEL-codes: D22 L21 L26 M21 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s11187-020-00378-0

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