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The Dog that Didn’t Bark: Long-Term Strategies in Times of Economic Crisis

45 Pages Posted: 22 Jun 2015 Last revised: 25 Apr 2017

Caroline Flammer

Boston University

Ioannis Ioannou

London Business School

Date Written: April 22, 2017


We investigate how U.S. companies adjusted their investments in key strategic resources--i.e., human capital, tangible, and intangible resources--during the Great Recession of 2007-2009. To obtain exogenous variation in the severity of the crisis, we exploit the differential intensity of the house price collapse across U.S. regions, instrumenting house price shocks with Saiz' (2010) topological measure of housing supply elasticity. Our findings indicate that companies significantly laid off employees and curtailed capital expenditures. Importantly, they did not reduce investments in R&D and corporate social responsibility (CSR). We further document that firms that sustained their R&D and CSR performed better once the economy recovered. Overall, these findings suggest that intangible strategic resources such as innovation capability and stakeholder relations are instrumental in sustaining a competitive advantage during (and beyond) times of economic crisis.

Keywords: economic crisis; competitive strategy; corporate social responsibility; innovation; employment; physical capital; financial performance

JEL Classification: M1, M2, M10, M14, E32, O31, O32

Suggested Citation

Flammer, Caroline and Ioannou, Ioannis, The Dog that Didn’t Bark: Long-Term Strategies in Times of Economic Crisis (April 22, 2017). Available at SSRN: or

Caroline Flammer (Contact Author)

Boston University ( email )

Boston University Questrom School of Business
595 Commonwealth Avenue, Office 634A
Boston, MA 02215
United States


Ioannis Ioannou

London Business School ( email )

Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom
02070008748 (Phone)


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