Survival of Firms during Economic Crisis

27 Pages Posted: 4 May 2020

See all articles by Erica Bosio

Erica Bosio

World Bank

Simeon Djankov

London School of Economics & Political Science (LSE); Peter G. Peterson Institute for International Economics

Filip Jolevski

Department of Economics, George Mason University; Enterprise Analysis Unit, Development Economics Vice Presidency, The World Bank

Rita Ramalho

World Bank

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Date Written: April 28, 2020

Abstract

We estimate the survival time of nearly 7,000 firms in a dozen of high-income and middle-income countries in a scenario of extreme economic distress, using the World Bank’s Enterprises Surveys. Under the assumption that firms have no incoming revenues and cover only fixed costs, the median survival time across industries ranges within 8 to 19 weeks, while on average firms have liquidity to survive between 12 and 38 weeks. Schumpeter’s (1934) theory of creative destruction is not corroborated in the data. A potential exit is not predicated on the size of firms, their age or their productivity.

Keywords: Firm Survival, Firm Exit, Creative Destruction, Crisis Management

JEL Classification: L20, L22, H12, E24, G01, H32

Suggested Citation

Bosio, Erica and Djankov, Simeon and Jolevski, Filip and Ramalho, Rita, Survival of Firms during Economic Crisis (April 28, 2020). GMU Working Paper in Economics Forthcoming, Available at SSRN: https://ssrn.com/abstract=3588346 or http://dx.doi.org/10.2139/ssrn.3588346

Erica Bosio

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Simeon Djankov

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Filip Jolevski (Contact Author)

Department of Economics, George Mason University ( email )

Fairfax, VA
United States

Enterprise Analysis Unit, Development Economics Vice Presidency, The World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Rita Ramalho

World Bank ( email )

Washington, DC 20433
United States

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