Survival of Firms during Economic Crisis
27 Pages Posted: 4 May 2020
Date Written: April 28, 2020
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
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