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Post-crisis firm survival, business model changes, and learning: evidence from the Italian manufacturing industry

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Abstract

Company survival after recessions depends on the entrepreneurial ability of decision makers to react to the crisis and learn how to make the best use of chances. The aim of this paper is to shed light on the relationship between post-crisis firm survival, learning, and firm’s entrepreneurial behavior measured by business model changes. Specifically, we test if firm survival after the 2009 recession has been affected by changes in the business model occurred in the period of recovery between the two recessions (2004–08), and if these changes are the result of deliberate reactions to the 2003 recession—i.e., learning hypothesis. The analysis of 67,241 Italian manufacturing firms suggests that business model changes have affected post-crisis firm survival by lowering the probability of default. However, the adoption of these default-reducing business model changes did not result to be significantly more frequent in firms that performed poorly during the 2003 crisis, thus providing weak support to the role of entrepreneurial learning in reducing defaults.

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Notes

  1. This view is also confirmed by the theoretical research on the demand impact on innovation (Geroski and Walters 1995): the rising demand during economic booms provides more fertile ground for the product absorption than during recessions. Moreover, as firms have only limited periods of advantage over their competitors (Schumpeter 1939), during which they reap their returns to investments, it is safer for them to come up with such activities when the economy is growing.

  2. BvD-AIDA is an authoritative and reliable source of information on Italian companies. Information is drawn from official data recorded at the Italian Registry of Companies and from financial statements filed at the Italian Chambers of Commerce. BvD-AIDA provides information on more than 500,000 joint stock, public and private limited share companies, and limited liability companies (Spa and Srl) that furnish data on a compulsory basis. The information provided includes credit reports, company profiles, and summary financial statements (balance sheet, profit and loss accounts, and ratios) updated every year.

  3. ATECO is the classification of economic activity used by the Italian Institute of Statistics (ISTAT). It is the translation of the NACE code (Nomenclature statistique des activités économiques dans la Communauté européenne) developed by the European Union from the International Standard Industrial Classification (ISIC) rev 3.1.

  4. These figures are in line with the average Italian death rate computed by Eurostat http://ec.europa.eu/eurostat/data/database(2015).

  5. A plus/minus 10% deviation from the initial value has been chosen because it permits a balanced division of the sample between firms that changed their business model and firms that did not.

  6. To define a (Global) Ultimate Owner, BvD analyzes the shareholding structure of each company looking for the shareholder with the highest direct or total percentage of ownership. If this shareholder is independent, it is defined as the Ultimate Owner of the subject company. If the highest shareholder is not independent (as in the case of controlling companies), the same process is repeated until BvD finds a Global Ultimate Owner. Shareholders information is gathered from several sources, including annual reports or privately written communications addressed by the company to BvD.

  7. As the correspondent increasing and reducing strategies of business model changes are significantly correlated, Eq. (3) has been estimated through a bivariate probit model for each business model proxy, i.e., Increased/Reduced Vertical Integration, Increased/Reduced Intangibles, Increased/Reduced Complexity.

  8. We assume that business model changes produce medium-term effects in terms of firm performance and survival.

  9. It is worth noting that the indication coming out from these estimates goes in the opposite direction of what we got from our previous preliminary analysis (Table 3). In the multivariate regression, we account for several firm-specific characteristics, such as the size, profitability, industrial sector, and geographical localization, which significantly affect post-crisis firm survival.

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Authors and Affiliations

  1. Department of Economics and Social Sciences, Università Politecnica delle Marche, 60121, Ancona, AN, Italy

    Marco Cucculelli & Valentina Peruzzi

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  1. Marco Cucculelli
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  2. Valentina Peruzzi
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Correspondence to Marco Cucculelli.

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Table 7 Sample coverage by size class.
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Cucculelli, M., Peruzzi, V. Post-crisis firm survival, business model changes, and learning: evidence from the Italian manufacturing industry. Small Bus Econ 54, 459–474 (2020). https://doi.org/10.1007/s11187-018-0044-2

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