Do crises Really Catalyze Creative Destruction? A Critical Reflection on Firm Survival

Abstract

Business survival has been a widely studied phenomenon in management literature given its impact on economic and social reality. There is some consensus that crises have a catalytic effect by driving the least efficient, productive, and profitable firms out of the market, while those best prepared with better technology, products, or business structure survive; this process is known as creative destruction. This study analyzed a sample of 5,000 firms using statistical survival models in order to identify the main factors affecting the life and disappearance of firms in periods of crisis (2008–2012) versus periods of recovery (2016–2020) to detect differentiated patterns of behavior. It was found that those firms that were driven out of the market during the crisis, unlike in the subsequent recovery period, were neither the less profitable nor the less efficient. Instead, more indebted firms or those that did not get the support of credit institutions were withdrawn from market. This result casts doubt on the effectiveness of the theorized process of creative destruction in times of economic crisis.