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Should we be conservative or aggressive? Managers’ responses in a crisis and long‐term firm survival

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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.
Keywords
Management of Technology and Innovation, Strategy and Management, Business and International Management, conservation of resources, financial crisis, firm age, SMEs, strategic, approaches, survival, ENVIRONMENTAL JOLTS, FINANCIAL CRISIS, SLACK RESOURCES, START-UP, PERFORMANCE, GROWTH, ENTRY, CASH, AGE, UNCERTAINTY

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MLA
Paeleman, Ine, et al. “Should We Be Conservative or Aggressive? Managers’ Responses in a Crisis and Long‐term Firm Survival.” JOURNAL OF MANAGEMENT STUDIES, 2024, doi:10.1111/joms.12993.
APA
Paeleman, I., Vanacker, T., & Zahra, S. A. (2024). Should we be conservative or aggressive? Managers’ responses in a crisis and long‐term firm survival. JOURNAL OF MANAGEMENT STUDIES. https://doi.org/10.1111/joms.12993
Chicago author-date
Paeleman, Ine, Tom Vanacker, and Shaker A. Zahra. 2024. “Should We Be Conservative or Aggressive? Managers’ Responses in a Crisis and Long‐term Firm Survival.” JOURNAL OF MANAGEMENT STUDIES. https://doi.org/10.1111/joms.12993.
Chicago author-date (all authors)
Paeleman, Ine, Tom Vanacker, and Shaker A. Zahra. 2024. “Should We Be Conservative or Aggressive? Managers’ Responses in a Crisis and Long‐term Firm Survival.” JOURNAL OF MANAGEMENT STUDIES. doi:10.1111/joms.12993.
Vancouver
1.
Paeleman I, Vanacker T, Zahra SA. Should we be conservative or aggressive? Managers’ responses in a crisis and long‐term firm survival. JOURNAL OF MANAGEMENT STUDIES. 2024;
IEEE
[1]
I. Paeleman, T. Vanacker, and S. A. Zahra, “Should we be conservative or aggressive? Managers’ responses in a crisis and long‐term firm survival,” JOURNAL OF MANAGEMENT STUDIES, 2024.
@article{01HCA3X3QQFHMN3XNX1Y4W5TMT,
  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.}},
  author       = {{Paeleman, Ine and Vanacker, Tom and Zahra, Shaker A.}},
  issn         = {{0022-2380}},
  journal      = {{JOURNAL OF MANAGEMENT STUDIES}},
  keywords     = {{Management of Technology and Innovation,Strategy and Management,Business and International Management,conservation of resources,financial crisis,firm age,SMEs,strategic,approaches,survival,ENVIRONMENTAL JOLTS,FINANCIAL CRISIS,SLACK RESOURCES,START-UP,PERFORMANCE,GROWTH,ENTRY,CASH,AGE,UNCERTAINTY}},
  language     = {{eng}},
  pages        = {{36}},
  title        = {{Should we be conservative or aggressive? Managers’ responses in a crisis and long‐term firm survival}},
  url          = {{http://doi.org/10.1111/joms.12993}},
  year         = {{2024}},
}

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