Contrasting Strategic Response to Economic Recession in Start-Up versus Established Software Firms

Economic recessions represent a period of greatly reduced environmental munificence that threatens the survival of all firms. This is especially the case for smaller, start-up firms, which have been shown to fail at a much higher rate compared with their larger, more established peers. This study surveyed 137 software executives regarding their strategic response to the most recent economic downturn (2001–2003). I draw upon Hofer's framework for turnaround strategies to develop hypotheses to explore how smaller, start-up firms adjust their strategies in response to economic recession. The results suggest that start-up organizations are much more inclined to pursue revenue-generating strategies as a means to weathering recession rather than cost reductions, which tended to be the preferred strategy of larger firms.