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Should we be Conservative or Aggressive? SMEManagers’ Responses in a Crisis and Long‐TermFirm Survival

Authors :
Paeleman, Ine
Vanacker, Tom
Zahra, Shaker A.
Source :
Journal of Management Studies; November 2024, Vol. 61 Issue: 7 p2849-2884, 36p
Publication Year :
2024

Abstract

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.

Details

Language :
English
ISSN :
00222380 and 14676486
Volume :
61
Issue :
7
Database :
Supplemental Index
Journal :
Journal of Management Studies
Publication Type :
Periodical
Accession number :
ejs67677645
Full Text :
https://doi.org/10.1111/joms.12993