IDEAS home Printed from https://ideas.repec.org/a/eee/ecolet/v114y2012i1p94-97.html
   My bibliography  Save this article

The effect of crises on firm exit and the moderating effect of firm size

Author

Listed:
  • Amorim Varum, Celeste
  • Rocha, Vera Catarina

Abstract

The liability of smallness assumption suggests that smaller firms face higher exit risks. However, does it apply during crises? We show that during downturns size reduces firms’ exit risk by less; the hazard rate increases more rapidly in size.

Suggested Citation

  • Amorim Varum, Celeste & Rocha, Vera Catarina, 2012. "The effect of crises on firm exit and the moderating effect of firm size," Economics Letters, Elsevier, vol. 114(1), pages 94-97.
    • Handle: RePEc:eee:ecolet:v:114:y:2012:i:1:p:94-97
    DOI: 10.1016/j.econlet.2011.09.015
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0165176511003442
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.econlet.2011.09.015?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Audretsch, David B., 1995. "Innovation, growth and survival," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 441-457, December.
    2. Mark Gertler & Simon Gilchrist, 1994. "Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 109(2), pages 309-340.
    3. Richard Ericson & Ariel Pakes, 1995. "Markov-Perfect Industry Dynamics: A Framework for Empirical Work," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(1), pages 53-82.
    4. Liu, Jin-Tan & Tsou, Meng-Wen & Hammitt, James K., 1999. "Do small plants grow faster? Evidence from the Taiwan electronics industry," Economics Letters, Elsevier, vol. 65(1), pages 121-129, October.
    5. Thorsten Beck & Asli Demirgüç‐Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, February.
    6. Miguel Manjón-Antolín & Josep-Maria Arauzo-Carod, 2008. "Firm survival: methods and evidence," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 35(1), pages 1-24, March.
    7. Agarwal, Rajshree, 1996. "Technological activity and survival of firms," Economics Letters, Elsevier, vol. 52(1), pages 101-108, July.
    8. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
    9. Boeri, Tito & Bellmann, Lutz, 1995. "Post-entry behaviour and the cycle: Evidence from Germany," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 483-500, December.
    10. Grilli, Luca & Piva, Evila & Lamastra, Cristina Rossi, 2010. "Firm dissolution in high-tech sectors: An analysis of closure and M&A," Economics Letters, Elsevier, vol. 109(1), pages 14-16, October.
    11. Hwee Hoon Tan & Hai Hui See, 2004. "Strategic Reorientation and Responses to the Asian Financial Crisis: The Case of the Manufacturing Industry in Singapore," Asia Pacific Journal of Management, Springer, vol. 21(1_2), pages 189-211, March.
    12. Silviano Pérez & Amparo Llopis & Juan Llopis, 2004. "The Determinants of Survival of Spanish Manufacturing Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 25(3), pages 251-273, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Klaus Friesenbichler & Agnes Kügler & Julia Schieber-Knöbl, 2023. "Intangible Capital as a Production Factor. Firm-level Evidence from Austrian Microdata," WIFO Working Papers 660, WIFO.
    2. Damien Rousselière, 2019. "A Flexible Approach to Age Dependence in Organizational Mortality: Comparing the Life Duration for Cooperative and Non-Cooperative Enterprises Using a Bayesian Generalized Additive Discrete Time Survi," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 17(4), pages 829-855, December.
    3. Elena Cefis & Cristina Bettinelli & Alex Coad & Orietta Marsili, 2022. "Understanding firm exit: a systematic literature review," Small Business Economics, Springer, vol. 59(2), pages 423-446, August.
    4. Jung, Hyejin & Hwang, JungTae & Kim, Byung-Keun, 2018. "Does R&D investment increase SME survival during a recession?," Technological Forecasting and Social Change, Elsevier, vol. 137(C), pages 190-198.
    5. M. Grazzi & C. Piccardo & C. Vergari, 2017. "Building a firm level dataset for the analysis of industrial dynamics and demography," Working Papers wp2003, Dipartimento Scienze Economiche, Universita' di Bologna.
    6. Armand, Alex & Mendi, Pedro, 2018. "Demand drops and innovation investments: Evidence from the Great Recession in Spain," Research Policy, Elsevier, vol. 47(7), pages 1321-1333.
    7. Varum, Celeste & Rocha, Vera Catarina & Valente da Silva, Hélder, 2014. "Economic slowdowns, hazard rates and foreign ownership," International Business Review, Elsevier, vol. 23(4), pages 761-773.
    8. Ichiro Iwasaki & Evžen Kočenda, 2020. "Survival of service firms in European emerging economies," Applied Economics Letters, Taylor & Francis Journals, vol. 27(4), pages 340-348, February.
    9. Iman Cheratian & Saleh Goltabar & Mohammad Reza Farzanegan, 2022. "Survival Strategies under Sanctions: Firm-Level Evidence from Iran," CESifo Working Paper Series 9568, CESifo.
    10. Giuseppe Arcuri & Marc Brunetto & Nadine Levratto, 2019. "Spatial patterns and determinants of firm exit: an empirical analysis on France," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(1), pages 99-118, February.
    11. Silvia Muzi & Filip Jolevski & Kohei Ueda & Domenico Viganola, 2023. "Productivity and firm exit during the COVID-19 crisis: cross-country evidence," Small Business Economics, Springer, vol. 60(4), pages 1719-1760, April.
    12. Kemal Türkcan & Hilal Erkuş-Öztürk, 2020. "The impact of economic and political crises on the survival of tourism-related firms: Evidence from Antalya," Tourism Economics, , vol. 26(7), pages 1152-1174, November.
    13. Ebuka Christian Orjiakor, 2022. "Business climate and firm exit in developing countries: evidence from Nigeria," Future Business Journal, Springer, vol. 8(1), pages 1-13, December.
    14. Jarle Aarstad & Stig-Erik Jakobsen, 2020. "Norwegian Firms’ Green and New Industry Strategies: A Dual Challenge," Sustainability, MDPI, vol. 12(1), pages 1-14, January.
    15. Cumming, Fergus, 2022. "Mortgage cash-flows and employment," European Economic Review, Elsevier, vol. 144(C).
    16. Annamaria Bianchi & Silvia Biffignandi, 2017. "The effect of size on business net change during crises: a multifactor partitioning analysis of Italian regions during 2007–2010," Letters in Spatial and Resource Sciences, Springer, vol. 10(2), pages 237-251, July.
    17. Bartz, Wiebke & Winkler, Adalbert, 2016. "Flexible or fragile? The growth performance of small and young businesses during the global financial crisis — Evidence from Germany," Journal of Business Venturing, Elsevier, vol. 31(2), pages 196-215.
    18. Oksana Seroka‐Stolka & Kamil Fijorek, 2020. "Enhancing corporate sustainable development: Proactive environmental strategy, stakeholder pressure and the moderating effect of firm size," Business Strategy and the Environment, Wiley Blackwell, vol. 29(6), pages 2338-2354, September.
    19. Young Rok Choi & Seongwook Ha & Youngbae Kim, 2022. "Innovation ambidexterity, resource configuration and firm growth: is smallness a liability or an asset?," Small Business Economics, Springer, vol. 58(4), pages 2183-2209, April.
    20. Paula Sarmento & Rosa Forte, 2019. "Does Foreign Presence Induce Host Country Firms’ Exit? The Case of Portugal," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 25(3), pages 323-337, August.
    21. Florian Eckert & Heiner Mikosch, 2022. "Firm bankruptcies and start-up activity in Switzerland during the COVID-19 crisis," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 158(1), pages 1-25, December.
    22. Luis Alfredo Arguelles Ma & Roman Alberto Quijano Garcia & Mario Javier Fajardo & Fernando Medina Blum & Carlos Enrique Cruz Mora, 2018. "Indebtedness As An Indicator Of Financial Profitability In The Tourist Mipymes Of Campeche El Endeudamiento Como Indicador De Rentabilidad Financiera En Las Mipymes Turisticas De Campeche," Revista Internacional Administracion & Finanzas, The Institute for Business and Finance Research, vol. 11(1), pages 39-51.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Silvia Muzi & Filip Jolevski & Kohei Ueda & Domenico Viganola, 2023. "Productivity and firm exit during the COVID-19 crisis: cross-country evidence," Small Business Economics, Springer, vol. 60(4), pages 1719-1760, April.
    2. Ugur, Mehmet & Trushin, Eshref & Solomon, Edna, 2016. "Inverted-U relationship between R&D intensity and survival: Evidence on scale and complementarity effects in UK data," Research Policy, Elsevier, vol. 45(7), pages 1474-1492.
    3. Ortiz-Villajos, José M. & Sotoca, Sonia, 2018. "Innovation and business survival: A long-term approach," Research Policy, Elsevier, vol. 47(8), pages 1418-1436.
    4. Carlos Carreira & Paulino Teixeira, 2011. "The shadow of death: analysing the pre-exit productivity of Portuguese manufacturing firms," Small Business Economics, Springer, vol. 36(3), pages 337-351, April.
    5. Francesco Quatraro & Marco Vivarelli, 2015. "Drivers of Entrepreneurship and Post-entry Performance of Newborn Firms in Developing Countries," The World Bank Research Observer, World Bank, vol. 30(2), pages 277-305.
    6. Alex Coad, 2007. "Firm Growth: a Survey," Post-Print halshs-00155762, HAL.
    7. Colombelli, Alessandra & Krafft, Jackie & Quatraro, Francesco, 2013. "Properties of knowledge base and firm survival: Evidence from a sample of French manufacturing firms," Technological Forecasting and Social Change, Elsevier, vol. 80(8), pages 1469-1483.
    8. Ugur, Mehmet & Trushin, Eshref & Solomon, Edna, 2015. "Inverted-U relationship between innovation and survival: Evidence from firm-level UK data," MPRA Paper 68010, University Library of Munich, Germany, revised 10 Nov 2015.
    9. Marco Vivarelli, 2013. "Is entrepreneurship necessarily good? Microeconomic evidence from developed and developing countries," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(6), pages 1453-1495, December.
    10. Richard I.D. Harris & Qian Cher Li, "undated". "Export-market dynamics and the probability of firm closure: Evidence for the UK," Working Papers 2008_17, Business School - Economics, University of Glasgow.
    11. Francesco Quatraro & Marco Vivarelli, 2013. "Entry and Post-Entry Dynamics in Developing Countries," GREDEG Working Papers 2013-20, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    12. Sven-Olov Daunfeldt & Niklas Elert, 2013. "When is Gibrat’s law a law?," Small Business Economics, Springer, vol. 41(1), pages 133-147, June.
    13. Quatraro, Francesco & Vivarelli, Marco, 2013. "Entrepreneurship In A Developing Country Context," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 201314, University of Turin.
    14. Silviano Esteve-Pérez & Amparo Sanchis-Llopis & Juan Sanchis-Llopis, 2010. "A competing risks analysis of firms’ exit," Empirical Economics, Springer, vol. 38(2), pages 281-304, April.
    15. Calá, Carla Daniela, 2009. "Spatial issues on firm demography: an analysis for Argentina," Nülan. Deposited Documents 1379, Universidad Nacional de Mar del Plata, Facultad de Ciencias Económicas y Sociales, Centro de Documentación.
    16. Kemal Türkcan & Hilal Erkuş-Öztürk, 2020. "The impact of economic and political crises on the survival of tourism-related firms: Evidence from Antalya," Tourism Economics, , vol. 26(7), pages 1152-1174, November.
    17. Harald Oberhofer & Tassilo Philippovich & Hannes Winner, 2015. "Firm Survival in Professional Sports," Journal of Sports Economics, , vol. 16(1), pages 59-85, January.
    18. Lee, Chang-Yang, 2010. "A theory of firm growth: Learning capability, knowledge threshold, and patterns of growth," Research Policy, Elsevier, vol. 39(2), pages 278-289, March.
    19. Vivarelli, Marco, 2012. "Drivers of entrepreneurship and post-entry performance : microeconomic evidence from advanced and developing countries," Policy Research Working Paper Series 6245, The World Bank.
    20. Vivarelli, Marco, 2012. "Entrepreneurship in Advanced and Developing Countries: A Microeconomic Perspective," IZA Discussion Papers 6513, Institute of Labor Economics (IZA).

    More about this item

    Keywords

    Survival; Hazard; Firm size; Crisis; Manufacturing; Portugal;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecolet:v:114:y:2012:i:1:p:94-97. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ecolet .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.