Organizational Resources, Country Institutions, and National Culture Behind Firm Survival and Growth during COVID-19

Abstract

We provide one of the first comprehensive and most updated studies on the effects of firms’ organizational resources, country institutions, and national culture on the survival and growth of private firms around the world during the COVID-19 pandemic. Analyzing World Bank Enterprise Follow-up Surveys on COVID-19 that covers 18,770 firms from 36 countries, we document four sets of findings. (1) During the pandemic, firms with favorable organizational resources (i.e., state ownership and affiliation with parent companies) are more likely to survive and grow, whereas firms with foreign ownership or with more financial obstacles are less likely to survive or grow. Firms in countries with a higher per capita income, a lower COVID spread, and a less stringent COVID control policy are more likely to survive and grow. (2) Favorable ownership and parent-company affiliations help cushion the pandemic shock during the pandemic. (3) The relationship between firm characteristics and firm survival/growth is significantly affected by the stringency of a country’s COVID policy. (4) Firm survival and growth are positively related to a country’s cultural tendency in terms of long-term orientation, and are not significantly related to uncertainty avoidance and individualism. The overall country governance quality is negatively linked to the odds for firm survival as well as revenue and employment growth.

Keywords: COVID-19, private firms, firm survival and growth, organizational resources, country institutions, national culture

JEL Classification: G01, G32, G38