From rapid decline to high growth: where in the distribution did COVID hit hardest?

Abstract

PurposeThe authors explore how did the COVID shock hit European firms at the upper quantiles (high-growth superstars) and the lower quantiles (rapidly declining firms).Design/methodology/approachThe authors analyze the European Investment Bank Investment Survey (2016–2020). This exploratory paper applies graphical techniques and quantile regression to evaluate the COVID shock along the growth rates distribution.FindingsRegarding growth of sales and growth of value added, COVID had a negative effect on growth across the growth rates distribution. The negative COVID effect is larger at the lower quantiles. Employment growth shows no effect for many firms that have zero employment growth, but at the extreme quantiles, the authors can observe that some declining firms were adversely affected by COVID. For labour productivity growth, the COVID effect is small. Analysis of subsamples, and quantile regressions with interaction terms, emphasize that firms receiving policy support were relatively strongly affected by COVID, consistent with interpretations that COVID policy support was reaching the intended recipients. Finally, fully digitalized firms may have been somewhat shielded from the harmful effects of COVID.Originality/valueFirst, previous studies have focused on the average effect of COVID on the growth performance. Our research contributes to understanding how the COVID shock affected the entire growth rates distribution, ranging to high-growth firms and declining firms. Second, governments devoted financial support to firms. Our analysis explores if COVID policy support was given to companies more affected by this shock. Third, previous digitalization may have boosted resilience by shielding firms from COVID’s harmful effects on firm growth.

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“…Quantitatively identifying specific differences between outlier and non-outlier groups can be a beneficial approach to using outliers for theory-building (Gibbert et al, 2021). Recent work highlights that outlier ventures, both the fastest growing and the rapidly declining ends of the spectrum, suffered the most from the international COVID shock (Coad et al, 2023). This suggests that going beyond averages, provides nuance to critical findings.…”

“…, 2021). Recent work highlights that outlier ventures, both the fastest growing and the rapidly declining ends of the spectrum, suffered the most from the international COVID shock (Coad et al. , 2023).…”

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“…However, the authors found that the effect was stronger at the lower quartiles as the lockdown of the economy adversely impacted some declining ventures. Coad et al . (2023) also found that fully digitalized ventures may have been somewhat shielded from the harmful effects of COVID-19.…”

“…As we navigate the intricate tapestry of entrepreneurial species, we uncover numerous research opportunities awaiting exploration. The jungle is vast , and while some studies have delved into the details of specific species (Abatecola et al ., 2021; Coad et al ., 2023), many uncharted territories remain.…”