TY - JOUR
T1 - Should we be Conservative or Aggressive? SME Managers’ Responses in a Crisis and Long-Term Firm Survival
AU - Paeleman, Ine
AU - Vanacker, Tom
AU - Zahra, Shaker A.
N1 - Publisher Copyright:
© 2023 The Authors. Journal of Management Studies published by Society for the Advancement of Management Studies and John Wiley & Sons Ltd.
PY - 2023
Y1 - 2023
N2 - Past research shows that during a crisis, managers of publicly-held firms often adopt a ‘conservative’ approach focused on protecting the existing core of their firms by decreasing investments and hoarding precautionary cash. By doing so, managers decrease firms’ short-term failure rates. However, the literature says little about how managers of private, Small and Medium-sized Enterprises (SMEs) (should) act during a crisis. To address this question, we draw on the Conservation of Resources (COR) theory. Empirically, we use longitudinal data from 38,885 Belgian SMEs’ responses to the 2008–09 financial crisis. Consistent with our expectations, we find that an ‘aggressive’ approach focused on resource investment during the crisis decreases SMEs’ failure rates for up to a decade after the crisis. Further, younger SMEs, and especially those in industries with more growth opportunities, adopt aggressive approaches. Overall, the results show that SMEs need to be aggressive during the crisis to ensure their long-term survival. Moreover, contrary to current depictions of younger SMEs as being vulnerable, and especially so in crises, our evidence highlights that they are surprisingly aggressive when being confronted with a crisis, relative to their older peers.
AB - Past research shows that during a crisis, managers of publicly-held firms often adopt a ‘conservative’ approach focused on protecting the existing core of their firms by decreasing investments and hoarding precautionary cash. By doing so, managers decrease firms’ short-term failure rates. However, the literature says little about how managers of private, Small and Medium-sized Enterprises (SMEs) (should) act during a crisis. To address this question, we draw on the Conservation of Resources (COR) theory. Empirically, we use longitudinal data from 38,885 Belgian SMEs’ responses to the 2008–09 financial crisis. Consistent with our expectations, we find that an ‘aggressive’ approach focused on resource investment during the crisis decreases SMEs’ failure rates for up to a decade after the crisis. Further, younger SMEs, and especially those in industries with more growth opportunities, adopt aggressive approaches. Overall, the results show that SMEs need to be aggressive during the crisis to ensure their long-term survival. Moreover, contrary to current depictions of younger SMEs as being vulnerable, and especially so in crises, our evidence highlights that they are surprisingly aggressive when being confronted with a crisis, relative to their older peers.
KW - SMEs
KW - conservation of resources
KW - financial crisis
KW - firm age
KW - strategic approaches
KW - survival
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U2 - 10.1111/joms.12993
DO - 10.1111/joms.12993
M3 - Article
AN - SCOPUS:85168564037
SN - 0022-2380
JO - Journal of Management Studies
JF - Journal of Management Studies
ER -