Beyond Static Profitability: Viability-Constrained Strategic Trajectories, Incumbent Retreat, and the Construction of Scale

Firms can fail despite profitable mature-state business models when no financeable path connects current and target states. Applying viability theory and reachability to strategy, this paper develops a three-state representation—liquidity, sustainable demand, and operating capability—and a minimum-slack viability-distance measure. It links startup under-scaling and incumbent retreat through a shared admissible-set structure, derives a retreat-connectivity prediction beyond technology-cost explanations, and proposes out-of-sample tests against established corporate-distress models.