Firm resilience in regions of Eastern Europe during the period 2007–2011

Abstract

Firms are important economic agents in regions, and their survival and prosperity in crisis periods is closely related to the evolution and welfare of the regions in which they are located. This ability of firms to respond to and recover from shocks is conceptualised by the notion of firm resilience. This paper studies the determinants of firm resilience in the regions of Eastern Europe during the period 2007–2011 using a novel, dynamic, spatial and broad conceptual framework aspect. The analysis shows through a variety of determinants that firms of Eastern EU countries have greater resilience, while it also highlights that the resilience of firms is defined, firstly, not only by current structural transformations but also by the initial conditions and, secondly, not only by the firms’ characteristics and capabilities but also by the spatial characteristics and irregularities of their broader environment.

Keywords:

• Firm resilience
• Eastern European regions
• economic crisis
• structural transformations
• initial conditions

Notes

1. Since 2008, the survey universe has consisted of the majority of the manufacturing sectors (excluding extraction), retail and residual stratum that includes most services sectors (wholesale, hotels, restaurants, transport, storage, communications, IT) and construction (EBRD, 2016).

2. Employment growth as performance proxy is less likely to run into problems and generate biases vis-à-vis to the productivity index (Dethier et al., 2011).

3. The category of human capital was also investigated, but its unimportant contribution (from the negative correlation of the change of share of skilled personnel to the total labour force) to firm resilience led to the exclusion of the category from the list.

4. In each field a variety of alternative variables have been used but here those with the greater statistical significance are presented.

5. There are not any problems of multicollinearity, while the Pagan–Hall test does not reject the null hypothesis of absence of heteroscedasticity due to endogeneity problems.

6. Despite the fact that a greater number of firms from non-EU countries presented resilience by a positive employment change (as mentioned in Section 3), the econometric analysis showed a greater significant resilience in firms of central EU countries.