Should we be Conservative or Aggressive? SME Managers’ Responses in a Crisis and Long-Term Firm Survival

Ine Paeleman, Tom Vanacker, Shaker A. Zahra

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

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.

Original languageEnglish (US)
Pages (from-to)2849-2884
Number of pages36
JournalJournal of Management Studies
Volume61
Issue number7
DOIs
StatePublished - Nov 2024

Bibliographical note

Publisher Copyright:
© 2023 The Authors. Journal of Management Studies published by Society for the Advancement of Management Studies and John Wiley & Sons Ltd.

Keywords

  • SMEs
  • conservation of resources
  • financial crisis
  • firm age
  • strategic approaches
  • survival

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