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Productivity and firm exit during the COVID-19 crisis: cross-country evidence

Small business economics, 2023-04, Vol.60 (4), p.1719-1760 [Peer Reviewed Journal]

The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2022. Springer Nature or its licensor (e.g. a society or other partner) holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law. ;The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2022, Springer Nature or its licensor holds exclusive rights to this article under a publishing agreement with the author(s) or other rightsholder(s); author self-archiving of the accepted manuscript version of this article is solely governed by the terms of such publishing agreement and applicable law. ;ISSN: 0921-898X ;EISSN: 1573-0913 ;DOI: 10.1007/s11187-022-00675-w ;PMID: 38625239

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  • Title:
    Productivity and firm exit during the COVID-19 crisis: cross-country evidence
  • Author: Muzi, Silvia ; Jolevski, Filip ; Ueda, Kohei ; Viganola, Domenico
  • Subjects: Business and Management ; Companies ; Coronaviruses ; COVID-19 ; Digital technology ; Economic crisis ; Entrepreneurship ; Governance ; Industrial Organization ; Innovations ; Insolvency ; Management ; Microeconomics ; Pandemics ; Productivity ; Regulation ; Small business
  • Is Part Of: Small business economics, 2023-04, Vol.60 (4), p.1719-1760
  • Description: This paper examines whether the economic crisis induced by the COVID-19 pandemic exhibits a Schumpeterian “cleansing” of less productive firms. Using firm-level data collected for 34 economies up to 18 months into the crisis, the study finds that less productive firms have a higher probability of permanently closing during the crisis, suggesting that the process of cleansing out unproductive activities is occurring. The paper also uncovers strong and negative relationships of firm exit with digital presence and with innovation. These relationships are driven by small firms. The study further finds that a burdensome business environment increases the probability of firm exit, also driven by small firms, and that a negative relationship exists between firm exit and age. Finally, evidence shows that the cleansing process is disrupted in countries which have introduced policies imposing a moratorium on insolvency procedures. Plain English Summary The purpose of this analysis is to investigate whether firms that are more productive are less likely to cease operation during the economic crisis induced by the COVID-19 pandemic. To verify this hypothesis, the paper uses data on firm characteristics, productivity, and status of operation from 34 countries. The data on firm characteristics and productivity were collected before the crisis, while data on the operating status were collected within 18 months since the appearance of the coronavirus. The results of the paper show that indeed, more productive firms are more likely to survive the crisis. In addition, businesses that have been in operation for longer, or ones which have a website or have introduced a new product in the years before the crisis are more likely to continue existing. The positive role of digitalization and innovation is true especially for small firms. Conversely, those businesses which have to spend more time in compliance with government regulations are less likely to survive. The policy implications show the importance of digitalization and innovation, the vulnerabilities of small firms, and the significance of good governance.
  • Publisher: New York: Springer US
  • Language: English
  • Identifier: ISSN: 0921-898X
    EISSN: 1573-0913
    DOI: 10.1007/s11187-022-00675-w
    PMID: 38625239
  • Source: ProQuest Central
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