Survival of the fittest: do firms actively or passively learn survival?

Abstract

Purpose

In the corporate world, there is no certainty of survival. This research aims to identify firm-level factors that increase or decrease a firm's probability of exit and survival.

Design/methodology/approach

The study examines 153 listed textile sector firms in Pakistan over a 10-year period from 2009 to 2018, comprising 1,413 observations. The semi-parametric Cox regression model is used to process the results.

Findings

The study finds that larger and exporting firms are more likely to survive, while those with a high ratio of fixed assets to total assets, high expenditure on advertising and variable costs are less likely to survive. The relationship between age and firm survival is inconclusive.

Research limitations/implications

Adaptability to the external environment provides a competitive advantage that is crucial for textile firms to reduce their chances of exit. The research is valuable for strategic managers and policymakers to identify focus areas to prevent firm exit.

Originality/value

This study supports the active learning theory, which suggests that new entrants in the textile sector of Pakistan should focus on becoming active market players, increasing efficiency and reducing variable costs to survive.

Citation

Naz, F., Kunwar, M., Alam, A. and Lutfullah, T. (2023), "Survival of the fittest: do firms actively or passively learn survival?", Journal of Economic and Administrative Sciences, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JEAS-10-2022-0239