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BRQ Business Research Quarterly (2019) 22, 119---136
www.elsevier.es/brq
BRQ
Business
Research
Quarterly
REGULAR ARTICLE
Improving the likelihood of SME survival during
financial and economic crises: The importance of TMTs
and family ownership for ambidexterity
Consuelo Dolz, Maria Iborra, Vicente Safón∗
Universitat de València, Faculty of Economics, Av. Tarongers, s/n, 46022 València, Spain
Received 18 January 2018; accepted 18 September 2018
Available online 23 October 2018
JEL
CLASSIFICATION
M10
KEYWORDS
Survival;
SME;
Top management
team;
Family ownership;
Organizational
ambidexterity
Abstract In the context of an economic and financial crisis characterized by scarce munif-
icence and high uncertainty, we examine the role of organizational ambidexterity in SMEs
survival, and the TMT and ownership characteristics that influence ambidexterity. Our anal-
ysis of Spanish manufacturing SMEs in the context of an international economic crisis suggests
that: (1) firm survival is associated with ambidexterity; (2) diversity in TMT tenure improves firm
ambidexterity and (3) a negative effect exists between family ownership and ambidexterity,
but (4) a positive effect exists between family ownership and survival.
This study contributes to our understanding of the antecedents of SME ambidexterity by
providing a theoretical model that combines the arguments of upper-echelons theory with
those found in family-firm research offering an extended view of corporate elites in SMEs. Our
research highlights and provides support to the superiority of ambidexterity for survival under
external (crisis) and internal (SMEs) restrictions.
© 2018 ACEDE. Published by Elsevier Espa˜
na, S.L.U. This is an open access article under the CC
BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).
Introduction
The last Great Recession, which started in 2008, has had
very negative effects on European companies, many of
which have not been able to overcome the simultaneous
∗Corresponding author.
E-mail addresses: consuelo.dolz@uv.es (C. Dolz), miborra@uv.es
(M. Iborra), safon@uv.es (V. Safón).
decrease in demand and the significant reduction in avail-
able financial credit (OECD, 2009). The significant rise in
business mortality rates during this last economic and finan-
cial crisis (OECD, 2018) has reopened the debate and the
interest regarding the survival of companies facing external
crises (Linnenluecke, 2017). A key element, but also a con-
troversial one, in explaining the persistence of companies
is ‘organizational ambidexterity’ (O’Reilly and Tushman,
2013).
https://doi.org/10.1016/j.brq.2018.09.004
2340-9436/© 2018 ACEDE. Published by Elsevier Espa˜
na, S.L.U. This is an open access article under the CC BY-NC-ND license (http://
creativecommons.org/licenses/by-nc-nd/4.0/).
120 C. Dolz et al.
Organizational ambidexterity is defined as the ability of
an organization to be simultaneously efficient in its manage-
ment of today’s business demands --- also called exploitation
orientation --- and adaptive to changes in the environ-
ment, called exploration orientation (Duncan, 1976). It is
a key construct in management research, due to its strong
theoretical link with long-term financial performance and
survival, and its empirical link with short-term performance
(Junni et al., 2013; O’Reilly and Tushman, 2013).
However, despite this general accepted assumption,
research raises theoretical doubts about the convenience of
organizational ambidexterity in contexts characterized by
external and internal restrictions.
Regarding external constraints, such as the context of
the last economic crisis in which munificence was very
low, research suggests that it can be dangerous to deploy
ambidexterity orientation, and that organizations are better
served by focusing on exploitation, given the strong pres-
sures on efficiency and prices (Cao et al., 2009; Gulati and
Puranam, 2009; Raisch and Hotz, 2008).
On the other hand, other authors raise questions
about the relevance of ambidexterity in contexts with
certain internal restrictions, especially for firms with sig-
nificant disadvantages in terms of management expertise,
access to capital, talent, and limitations on the devel-
opment of slack resources, such as small and medium
enterprises (SMEs) (Ebben and Johnson, 2005). In this con-
text, it appears to be less feasible for SMEs to become
ambidextrous than for larger firms, which have greater
and more diverse resources, as well as more ways to
become ambidextrous, as e.g. through structural ambidex-
terity (O’Reilly and Tushman, 2011). For these reasons, some
researchers suggest that SMEs should concentrate all of
their efforts and resources on either explorative or exploita-
tive activities, rather than on both, in order to survive
a crisis (Ebben and Johnson, 2005; O’Reilly and Tushman,
2011).
As far as we know, no study has considered both contexts
together, i.e. SMEs and a profound external crisis, leaving an
important research gap which requires additional research
into the ability of SMEs to be ambidextrous and into the
positive or negative effect of organizational ambidexterity
on survival, in these particular contexts.
Although there is abundant literature that studies the
drivers of organizational ambidexterity in large compa-
nies, in the case of SMEs the literature is scarce. There
is some research that tries to answer how SMEs become
ambidextrous (Lubatkin et al., 2006). These studies argue
that ambidexterity is a dynamic capability that requires the
development of sensing, seizing and transforming activi-
ties, which relies on managers who play a significant role
in integrating the contradictory demands of exploration and
exploitation.
In SMEs, in situations where their survival is at risk, we
argue that an extended view of upper echelons --- i.e., not
only managers but also owners --- could play key roles in
achieving ambidexterity. Based on an amplified view of the
upper-echelons theory, we argue that decision-making capa-
bilities that allow SMEs to sense environment change and
to seize explorative and exploitative alternatives rely on
the SMEs’ top management teams (TMTs) diversity, while
capabilities that allow the reconfiguration of resources rely
on SMEs’ owners. Specifically, we follow researchers that
state that tenure diversity within the TMT affect the ability
of upper echelons to process information (i.e., the abil-
ity to sense environment change), to look for alternatives,
and to make strategic decisions associated with differ-
ent levels of risk taking (McClelland et al., 2011, 2010;
Simsek, 2007). Moreover, we suggest thereby it enables
the organization to respond to the environment change,
combining exploitation and exploration in a balanced
way.
TMT tenure diversity can improve sensing and seizing, but
ambidexterity requires also transforming which relates to
reconfiguring resources and modifying priorities. We argue
that among SMEs, changes in firms’ priorities will rely on
their owners. In fact, research suggests that family owner-
ship is associated with the discretion to manage, assign, add
to, or dispose of the firm’s resources in order to exploit and
explore (De Massis et al., 2014; Veider and Matzler, 2016).
Compared with large firms, the interaction in SMEs
between managers and owners is close and frequent; even
more so in the case of family owned firms in which the
roles of managers and owners are interlaced. We propose
that in SMEs both management and ownership characteris-
tics could offer unique insights into how upper echelons can
sense, seize, and reconfigure resources in order to become
ambidextrous. Additionally, SMEs under a constrained and
financial distress environment face decisions related to
survival or not, to bankruptcy or solvency. In this criti-
cal environment, SMEs have to make key decisions about
their financial structure, i.e. regarding temporary liquid-
ity shocks or reduced access to bank finance, about the
divestment of key assets to recover or about the level and
scope of workforce reductions (McGuinness et al., 2018).
We argue that an extended view of upper echelons, which
includes managers and owners, may better explain SMEs
ambidextrous decision making and behavior in deep external
crises.
Our study makes several contributions. First, we
contribute to the growing literature on organizational
ambidexterity by investigating its impact on survival
in a context of external (economic and financial cri-
sis, low munificence environments) and internal (SMEs)
restrictions. Second, we propose an extended view
of upper echelons that includes managers and own-
ers in order to explain SME’s behavior and actions
under survival threats. Third, we add to the fam-
ily firm and ambidexterity literature, focusing on the
impact of family ownership on SMEs ambidexterity and
survival. Finally, we contribute to the SMEs literature
by offering evidence of the positive consequences of
ambidexterity for SME survival in environments of low
munificence.
In the next section, we review the literature and
present our hypotheses. We first examine an extended
view of upper-echelons as antecedent of organizational
ambidexterity. We follow by analyzing the relationship
between family ownership, ambidexterity and survival.
After describing our research method, we present our
empirical findings, which derive from data on Spanish man-
ufacturing SMEs. We conclude with a discussion of the
results, as well as their implications and issues for further
research.
Improving the likelihood of SME survival during financial and economic crises 121
Ambidexterity in SMEs: The role of extended
upper echelons
Ambidexterity has been studied from different perspectives,
including organizational learning (Levinthal and March,
1993; March, 1991), organizational behavior (Gibson and
Birkinshaw, 2004), technological innovation (He and Wong,
2004), and the organizational theory of dynamic capabili-
ties (O’Reilly and Tushman, 2008). In our study we rely on
the latter, defining dynamic capabilities as an organization’s
ability to integrate, construct, and reconfigure internal and
external competencies in order to quickly deal with chang-
ing environments (Teece et al., 1997). According to O’Reilly
and Tushman (2008), the capabilities that firms need to be
successfully ambidextrous are consistent with Teece’s (2007)
tripartite taxonomy of sensing, seizing, and reconfiguring or
transforming.
Due to the fact that SMEs lack the volume of slack
resources and the sort of hierarchical administrative systems
that can help them address the contradictory informa-
tion and knowledge processes that ambidexterity demands,
they have to rely more on their upper echelons to attain
ambidexterity (Lubatkin et al., 2006). In SMEs, we argue
for an extended view of upper echelons, i.e. that takes into
account the role of managers and ownership playing key and
diverse roles in sensing, seizing and transforming (Lubatkin
et al., 2006; O’Reilly and Tushman, 2011, 2013).
In that sense, Hambrick and Mason (1984) started the
stream of research on upper echelons, focusing mainly on
the key role of top managers in firms’ behavior. A TMT is
the ‘‘small group of most influential executives at the apex
of the organization --- usually the CEO (or general manager)
and those who report directly to him’’ (Finkelstein et al.,
2009: 10). Finkelstein et al. (2009) state that in smaller firms
owners may be more active by increasing their involvement
from the traditional role as monitors of strategic results to
strategic formulation and selection, and thus the upper-
echelons theory could be extended to include owners. In
SMEs, TMT members have numerous and close ties to other
upper-echelon members in contrast to the typical situation
in larger firms. Consequently, owners and executives will
influence the strategic orientation of the firm (Rivas, 2012)
and may have specific effects on SMEs’ capabilities (Chen,
2011; Simsek et al., 2015). Additionally, we argue that man-
agers and owners should have a different role in sensing,
seizing and transforming.
As Teece (2007) states, sensing capabilities require firms
to obtain and interpret information and shape it in new
ways; more specifically, upper echelons should have the
skills needed to shape novel information and to avoid getting
trapped in the experiential, well-known, and usual sources
of information. Sensing demands that a TMT fosters learn-
ing, accepts failure, and challenges the status quo (O’Reilly
and Tushman, 2008). On the other hand, seizing capabili-
ties require the development and sharing of strategic intent,
an ability to think ‘‘outside the box,’’ and avoidance of
the usual mindsets. To address opportunities, some for-
mal decision-making rules must be broken and bureaucratic
features that reinforce the status quo must be overcome
(Teece, 2007). Therefore, seizing capabilities require cre-
ativity and the acceptance of uncertainty and risk by the
TMT of SMEs. Finally, transformation implies reallocating
assets and resources to capture new opportunities; it also
involves accepting changes in the orchestration of the firm’s
assets and a shared commitment to such changes, as well as
the power and discretion to execute decisions (O’Reilly and
Tushman, 2008; Teece, 2007).
Therefore, in SMEs we suggest that sensing and seiz-
ing relate to the TMT’s decision-making capabilities for
analyzing diverse and rich information, and for creating
alternatives that break with the status quo. However, trans-
forming, i.e. the reconfiguration of assets, appears to be
related to ownership issues. Reconfiguring requires the dis-
cretion, commitment, and power to allocate firm resources
among alternatives and to maintain them over time
(Finkelstein and Hambrick, 1990; O’Reilly and Tushman,
2011).
Additionally, this extended view of upper echelons, i.e.
taking into account the role of managers and owners, may
be more necessary under extenuating conditions. The finan-
cial crisis and the subsequent economic downturn led to
dramatic reductions in both aggregate demand and bank
lending for SMEs across the EU. As McGuinness et al. (2018:
83) state ‘‘according to European Commission data, during
the period of 2008 to 2011 loans to SMEs of less than D1
million declined at an average of 47% against the pre-crisis
peaks with falls in the region of 66% in Spain. Furthermore,
Spanish SMEs report the greatest losses in employment,
turnover and profitability compared to SMEs in other Euro-
pean countries’’. As a consequence, in this constraining and
financial distress environment, SMEs need to make key deci-
sions about their financial structure for survival (they are
more likely to experiment temporary liquidity shocks and
constraints in their access to bank finance, and are more
likely to rely on trade credit (McGuinness et al., 2018)). In
addition they need to reassign key assets to recover or to
define the level and scope of workforce reductions, and it is
not only managers but mainly SME owners who will influence
their direction. When decision making is related to the reas-
signment of resources in order to survive or die, bankruptcy
or solvency, owners will influence SMEs behavior.
SMEs ambidexterity and TMT tenure diversity
The upper-echelons theory (Hambrick and Mason, 1984)
studies the relationship between upper-echelon character-
istics, such as values and experiences, and firm behavior
and performance (Finkelstein et al., 2009). The number of
demographic characteristics, job related (e.g. functional
diversity, educational diversity) and non-job related (e.g.
age or gender diversity), is enormous, but each of them
is linked to certain specific psychological factors (García-
Granero et al., 2017). In that sense, executive tenure is
a demographic characteristic associated with three main
psychological factors: commitment to the status quo, risk
aversion and limited information processing (Finkelstein
et al., 2009). Therefore, we expect that executive tenure
will be highly relevant for decision making on exploitation
and exploration because it affects information processing,
commitment to the status quo and attitudes toward risk tak-
ing (McClelland et al., 2010, 2011; Simsek, 2007), especially
in relation to strategic choices that involve complexity and
122 C. Dolz et al.
uncertainty (Chen, 2011). In this line the effect of observ-
able characteristics of executive tenure --- such as age (proxy
of tenure in career) or time spent in top management posi-
tions (proxy of tenure in position) --- on decision making has
been extensively studied (McClelland et al., 2010; Wiersema
and Bantel, 1992).
Concerning age, older TMT members tend to be more
risk averse and they prefer alternatives with short-term
outcomes. They have their own ‘‘recipes’’ that have been
proven in the past and they tend to develop a commitment
to the status quo. Wiersema and Bantel (1992) argue that
people tend to become more rigid, inflexible, and resistant
to change as they age. In other words, they tend to behave
in a more exploitative manner. When the TMT incorporates
younger people, and age diversity increases, it may be bet-
ter able to take advantage of opportunities that demand
changes in the firm and thereby improve the firm’s seizing
capabilities. Chen (2011) provides evidence of the role of
TMT age in risky and uncertain strategic situations, such
as an organization’s internationalization regarding emerg-
ing economies. Moreover, some studies find evidence of the
influence of age diversity on proactive behaviors and risk
taking (Escribá-Esteve et al., 2008; Wiersema and Bantel,
1992). This tenure diversity implies that the different time
horizons of the careers of TMT members affect the decision-
making processes and that the degree of compromise in
relation to new projects varies as a result. The tendency
of older TMT members to focus on the status-quo and to
exploit well-known solutions during an external economic
and financial crisis will be balanced by younger TMT mem-
bers, who are expected to focus on novel and innovative
projects. Therefore, this tenure diversity in the TMT could
help SMEs not only focus on exploitative alternatives but
also explore new opportunities, which should enhance their
ambidexterity.
With respect to tenure in position, it has consequences
for information processing (e.g. different scopes of vision,
perception, and interpretation; Fernández-Mesa et al.,
2013; McClelland et al., 2010). The upper-echelons lit-
erature links this tenure diversity with the richness of
information sources, and with the amplitude and variety
of analyses utilized in decision-making processes. Wiersema
and Bantel (1992) argue that team members with simi-
lar tenures have undergone the same socialization process,
and share similar management experiences and problems.
However, heterogeneous TMTs rely on a variety of infor-
mation sources, have numerous points of view, consider
more alternatives, favor the exploration of ideas, and offset
the tendency to exploit well-known areas. Moreover, tenure
diversity decreases the tendency to engage in group thinking
(Milliken and Martins, 1996; Simons et al., 1999).
Gedajlovic et al. (2012) state that decision making pro-
cesses are comprehensive when TMTs can evaluate a number
of opportunities and apply multiple criteria. They argue
that comprehensive processes influence ambidexterity. This
implies a need for exhaustive processes for sensing the
environment----processes that allow for discovering, identify-
ing, and evaluating multiple opportunities and alternatives.
Therefore, ambidexterity requires divergent thinking to
identify and evaluate----in order to sense----exploration
opportunities. It also requires convergent thinking for
exploiting those opportunities (Lubatkin et al., 2006). The
diversity in experiences that arises from tenure diversity
contributes various points of view, and enhances the
richness of the criteria used to identify and evaluate
alternatives. As such, it facilitates more comprehensive
processes.
Tenure diversity could be specifically useful for achieving
ambidexterity when there are changes in economic con-
ditions, and even more so if they are sudden, profound
and quick. In one year in Spain, the national index of
economic activity changed from positive rates in the first
semester of 2008 to negative rates in 2009 (INE database).
From a financial point of view, Crespí and Martín-Oliver
(2015) argue that Spain constitutes an ideal framework to
study the effect of financial restrictions and a credit crunch
on non-financial companies because their basic source of
external funds is bank debt and this was added to a sol-
vency crisis in Spanish banks which reduced the supply
of available bank credit. In that sense, according to the
European Commission data, during the period of 2008 to
2011, loans of less than D1 million to SMEs declined by
an average of 66% in Spain against the pre-crisis peaks
(McGuinness et al., 2018).
As Schmitt et al. (2010) state, management research has
largely analyzed the ambidexterity premise under stable
or growing environmental conditions. However, during the
sub-prime crisis in late 2008 the resulting organizational
challenges were completely new and qualitatively dissimilar
to those associated with growth. Under these challenges,
tenure diversity will favor the sensing of the first signals
of change through enriching information processing, as well
as improving the likelihood of breaking the commitment to
the status quo, lowering risk aversion, and offering novel
answers and enforcing ambidexterity. This leads to our first
hypothesis:
Hypothesis 1. In an environment of financial and economic
crisis in SMEs, TMT tenure diversity is positively related to
the firm’s ambidexterity.
SME ambidexterity and family ownership
As we noted above, in the context of an external finan-
cial and economic crisis, achieving ambidexterity in SMEs
requires specific capabilities not only for sensing and seiz-
ing but also for transforming resources. In SMEs ownership
could be relevant to help explain transforming, because it
demands power and discretion to reassign key resources.
According to Mintzberg’s (1983) seminal work on power in
organizations, two central dimensions for evaluating the
power of ownership are the owners’ involvement1and the
ownership concentration. As Mintzberg (1983) states, the
more involved the owners and the more concentrated their
ownership, the greater their power in the company. Follow-
ing this line, we argue that family ownership, defined by
the majority of stock in the hands of a family, could play
a key role in achieving ambidexterity in SMEs. The owners
of family SMEs could use their significant power to initiate
1Involvement distinguishes owners who play a role in or around
the firm, such as the owners of most family SMEs, from those owners
who are not engaged in the company’s activities.
Improving the likelihood of SME survival during financial and economic crises 123
change and ensure execution of decisions in order to achieve
the desired outcomes; family ownership grants them the
power and freedom to explore and renew the firm (Veider
and Matzler, 2016) and to control and monitor efficiency
improvements (Hiebl, 2015). Moreover, family ownership
increases attachment in decisions, strengthens control, and
accelerates decision making (Boeker and Karichalil, 2002;
Le Breton-Miller and Miller, 2006). This suggests that in SMEs
family ownership provides the power and discretion needed
to reconfigure resources in order to explore or exploit under
a changing environment.
However, while ability (having the power and discre-
tion) is demanded, willingness is also needed because the
characteristics of family firms may affect their decisions on
exploration, exploitation and ambidexterity (Nieto et al.,
2015; Veider and Matzler, 2016).
In respect to exploration, family business scholars agree
that family-owned firms have a conservative vision and
tend to avoid decisions that may increase risk and uncer-
tainty such as innovation investments (Gómez-Mejía et
al., 2010; König et al., 2013). There are several rea-
sons for this unwillingness to innovate, such as risk
aversion or an interest to protect and preserve their
socio-emotional wealth (SEW) (Sciascia et al., 2015;
Gómez-Mejía et al., 2014), as well as their loss aver-
sion attitude being more concerned with avoiding losses
than with obtaining gains in order to preserve their SEW
(Chrisman and Patel, 2012). On the one hand, according
to agency arguments, the wealth of SME family own-
ers is often completely invested in the firm and this
wealth concentration increases their sensitivity to uncer-
tainty and affects their preferences regarding investments
in their companies (Anderson et al., 2003; Gómez-Mejía
et al., 2014). On the other hand, according to SEW
researchers, the high level of power of family owners
over the company and the close ties between the fam-
ily and the firm result in socioemotional endowments
that family members wish to preserve and reinforce (e.g.
the maintenance of family influence) (Berrone et al.,
2010; Zellweger et al., 2012; Gómez-Mejía et al., 2014).
Nevertheless, those non-economic goals may have a neg-
ative effect on a family’s innovation behavior (König
et al., 2013). Consequently, because of all these fac-
tors, family-owned SMEs could have difficulties to achieve
exploration.
Contrary to this negative view, from a long-term perspec-
tive other authors state that family-owned firms, because
of their main interest to transfer the company to the fol-
lowing generations, will show a greater concern to develop
the necessary skills to look for new business opportuni-
ties, which allows them to be explorative (Kellermanns and
Eddleston, 2006). Other researchers link power concentra-
tion in family-owned firms to exploration on grounds other
than long-term incentives and continuity. Family ownership
increases discretion, which in turn allows for investments
in new opportunities. Researchers adopting this view argue
that family-owned firms are more skillful at exploration, cre-
ating new products, entering new markets, and adapting
to the environment (Gedajlovic et al., 2004; Schulze and
Gedajlovic, 2010).
While researchers provide both positive and negative
arguments of family owners’ willingness to explore, the
empirical evidence on large public firms seems2to be in
favor of the negative view (Block, 2012; Block et al., 2013;
Chen and Hsu, 2009; Gómez-Mejía et al., 2014; Mu˜
noz-
Bullón and Sánchez-Bueno, 2011). For example, Chen and
Hsu (2009) demonstrate that family ownership is negatively
related to R&D investments. They argue that family owner-
ship will reduce the motivation to invest in long-term R&D
projects due to the wealth invested in the firm and the risk
aversion of losing it, as well as the lower level of qualified
staff, and the myopic behavior amongst other reasons. Also,
in 964 large public firms, Chrisman and Patel (2012) found
evidence that R&D investments were lower in family firms
compared to non-family firms.
Regarding exploitation, we state that family ownership
may enable exploitation through incentives to closely mon-
itor a firm’s operations and through taking the necessary
steps to ensure that costs are contained, production is effi-
cient, and resources are efficiently used (Carney, 2005;
Gedajlovic et al., 2012); family ownership will closely mon-
itor operations and take the necessary actions to address
inefficiencies (Gedajlovic et al., 2004). Thus, family own-
ership provides both strong incentives and the discretion
needed to refine and improve existing capabilities to
become exploitative. These capabilities in the family firm
are added to the natural tendency of companies in favor of
exploitation, given their observable and short-term returns,
in comparison with those of exploration (March, 1991).
Empirically, Hughes et al. (2017) found evidence in a sample
of 129 family firms that exploitation is a key ingredient of
performance for all of their family firm configurations.
In SMEs --- that have limited internal resources --- in a hos-
tile context of economic crisis --- i.e. of limited external
resources --- the pursuit of ambidexterity may demand that
hard choices are made about where to allocate resources,
to exploitation, to exploration or to both. We argue that
under an economic and financial crisis, with increases of
more than 100% on the rates of bankruptcy, with decreases in
the supply of financial debt and with limited access to exter-
nal financial capital (Blanco et al., 2016), the investment on
risky, long-term oriented, explorative activities in SMEs will
be less likely under family ownership which may perceive
the survival of the firm as being at risk and thus increasing
their loss aversion (Chrisman and Patel, 2012). In this con-
text, family-owned SMEs may be specifically concerned with
the SEW priorities of family members, with goals primarily
related to a firm’s survival in which increased efficiency is
prioritized through controlling costs or through incremen-
tal innovation --- i.e. through exploitation --- but avoiding the
risk and uncertainty of exploration (Block et al., 2013). This
leads to our next hypothesis:
2However, the empirical evidence highlights clear differences for
founder ownership (positive relationship support) vs family own-
ership (negative relationship support) both in inputs (Block, 2012;
Gómez-Mejía et al., 2014) and R&D outputs (Block et al., 2013).
Also, Filser et al. (2018) state that different dimensions of fam-
ily SEW may have a different impact on innovativeness, not finding
evidence for the dimension of family influence on innovativeness.
124 C. Dolz et al.
Hypothesis 2. In an environment of financial and eco-
nomic crisis, SMEs’ family ownership is negatively related
to ambidexterity.
In an environment of crisis family-owned SMEs will be
motivated to direct the firm toward its particularistic goals,
economic and non-economic ones. As discussed before,
family-owned SMEs have some idiosyncratic characteris-
tics that differentiate them from their counterparts of
non-family firms. Do these characteristic features allow
family-owned SMEs to better weather the economic crisis
for survival?
The recent crisis has meant a significant restriction of
financial resources for companies, especially for SMEs. In
the Spanish case, credit was rationed and finance suppli-
ers and banks strengthened credit conditions for firms or in
some cases the access to funding was stopped (Crespí and
Martín-Oliver, 2015; Blanco et al., 2016; McGuinness et al.,
2018). As a result, firms found it very difficult to finance
their activities, whether they were current or new projects.
On the one hand, in their interest to safeguard family
control in the company and preserve their socio-emotional
wealth, family-owned SMEs are reluctant to use external
funds (Romano et al., 2000; Gómez-Mejía et al., 2007), pre-
ferring to finance the company through the money of the
family or through undistributed benefits. In fact, the rein-
vestment of profits --- self-financing --- is the main source
of financing of family-owned SMEs. On the other hand,
family-owned firms have long-term goals and they focus on
activities that create and preserve the wealth of the fam-
ily (Anderson and Reeb, 2003; Le Breton-Miller and Miller,
2006). As a consequence, during downturns family-owned
SMEs will be willing to seek funding if necessary in order
to achieve these goals. In this case, due to their long-term
commitment and reputation, family-owned firms may access
credit more easily as lenders perceive that their interests
coincide with those of the family-owned firm (Crespí and
Martín-Oliver, 2015).
Crespí and Martín-Oliver (2015) found strong evidence in
a panel of more than 14,000 private family firms of a bet-
ter access to external finance of family firms during the
last economic crisis. They argue that due to the fact that
agency costs could be lower in family firms because of their
long-term orientation, the lender will perceive that their
interests coincide more with the ones of the family firm,
and provide better conditions in the loan contract. Addition-
ally, the strong solid relations built with stakeholders during
periods of expansion could reduce agency costs and may
diminish the lenders’ perceptions of risk regarding family
firms (Crespí and Martín-Oliver, 2015). Trade credit is a very
relevant source of finance for SMEs and, as McGuinness et al.
(2018) find evidence in a sample of 202,696 non-financial
unlisted EU SMEs, an increase in trade credit in an economic
and financial crisis improves the likelihood of survival. Thus,
the above reasons will allow family-owned SMEs to better
weather the economic crisis and survive.
We found additional arguments from a SEW perspective.
We state that under an economic and financial crisis, in
which there is an increase in the likelihood or probability of
bankruptcy, the financial goals linked to survival converge
with the family SEW goals (Chua et al., 2018). Bankruptcy
may end with a loss of the family patrimony (owners will
be the last creditors to be remunerated at bankruptcy).
Furthermore also it could end with the SEW of the fam-
ily firm with losses related to family identification, because
bankruptcy may damage their family image and reputation,
their emotional endowments and the likelihood of dynastic
succession (Berrone et al., 2012). In such an environment,
survival will be a goal in which family-owned firms will
outperform non-family firms because the family oriented
financial benefits of survival will be complementary with the
non-financial benefits of survival (Chua et al., 2018). Hence,
Hypothesis 3. In an environment of financial and economic
crisis, SMEs’ family ownership is positively related to sur-
vival.
Survival in SMEs: The role of ambidexterity
Starting with the overview that the meta-analysis of Junni
et al. (2013) offers regarding the relationship between
ambidexterity and performance, Table 1 summarizes the
studies that link organizational ambidexterity with short-
term performance and the internal contingencies of SMEs,
or that link organizational ambidexterity with survival under
external contingencies offering contradictory results about
the ubiquity of ambidexterity under internal and external
contingencies of restrictions.
In adverse conditions, such as a worldwide economic
crisis, survival becomes very complicated for companies,
especially SMEs (O’Reilly and Tushman, 2011). For example,
bankruptcy in the manufacturing industry in Spain increased
by more than 100% in 2008, with rates of growth between
200% and 390% until 2012 compared with data from 2007
(INE, 2017). In this context, survival is an important con-
sideration because it is a necessary condition for SMEs
long-term success, and given the mortality rates of these
firms, it is not a trivial matter. SMEs have to deal with
an important sales decrease, the collapse of profitability
or credit rationing, among other problems (Blanco et al.,
2016).
As Table 1 shows, previous studies that relate SMEs
ambidexterity with short-term performance present contra-
dictory findings. Some studies found a positive relationship
between ambidexterity and performance in SMEs (Lubatkin
et al., 2006) while others doubt this positive relationship.
For instance, Ebben and Johnson (2005) find that small firms
benefit less when they try to combine efficiency and flexibil-
ity than when they focus on one or the other. Similarly, Voss
and Voss (2012) point out that SME managers achieve bet-
ter performance when they focus on exploitation than when
they look for ambidexterity. However, all of this research
focuses on short-term financial performance. It seems plau-
sible that as Ebben and Johnson (2005) demonstrate, the
configurations of small firms to achieve exploitation or
exploration outperform hybrid configurations in short-term
performance. When a small firm adapts its processes, its
organizational design, its human resource policies and its
control and planning systems towards efficiency or towards
flexibility, it will obtain advantages and may outperform
an ambidextrous SME in the short term. However, does this
focus endanger the long-term performance and survival of
SMEs when faced with an economic or financial crisis?
Improving the likelihood of SME survival during financial and economic crises 125
Table 1 Studies that link SME’s organizational ambidexterity (OA), performance and contingencies.
Study Sample Goals related to OA-P Firms Environment Performance (P) Contingencies Performance term Main results
Intern Extern Short Long
Junni et al.
(2013)
Meta-analysis
of 25 samples
from 17 studies
with a total of
26,183
observations
To understand the
relationship between
OA and performance
Studies include
different types of
firms and
industries
Objective (growth
and profit) and
perceptual short
term measures
×Positive moderate
effect of OA on
performance
Lubatkin et al.
(2006)
139 SMEs To analyze the impact
of OA on short term
relative performance
From 20 to 500
employees;
Connecticut
(USA); 54%
manufacturing;
rest others
Control for
environment
uncertainty
Short term
performance
Subjective relative
measure
×× OA is positive related
to performance in
SMEs
Ebben and
Johnson (2005)
144 small firms
through survey;
200 small firms
through
website
To understand the
short term
performance
consequences of
efficiency, flexibility
or mixed strategies
Manufacturing
firms and small
firms
Short term
performance at
the end of the
year of the survey
(ROIC, ROE, ROA)
×× Efficiency or
flexibility outperform
mixed ones in SMEs
Gulati and
Puranam (2009)
Theoretical
paper
Conditions under
which it can be better
to be ambidextrous or
focus
Level of
environment
change
×× Under extreme
stability or extreme
change there will be
gains for focus
instead of OA
Schmitt et al.
(2010)
Case study
(Samsung)
Analyze the role of
OA over survival
under resource
scarcity
Large diversified
firm
Asian 1997
turbulent
economic crisis;
disruption
Survival ××OA is positive related
to performance and
survival under crisis
Piao (2010) 98 firms from
1980 to 1999
Analyze the role of
exploration and its
overlap with
exploitation on firm’s
longevity
Hard disk drive
industry
Industry with four
major transitions
of product-market
domains
Longevity ××Balanced overlap of
exploration and
exploitation positive
with longevity under
major transitions
Hill and
Birkinshaw
(2014)
95 corporate
ventures
Analyze the role of
OA on corporate
ventures survival
after crisis
Corporate venture
units;
multi-industry
Severe downturn
in venturing
activity during
2002 and 2003
Survival ××OA is positive related
to corporate venture
unit’s survival under
severe downturn
126 C. Dolz et al.
We argue that when faced with a huge financial and
economic crisis, the goal of SMEs shifts: from increas-
ing short-term performance to ensuring survival. While
exploitation will enable a firm to reduce losses through
workforce reductions or by improving productivity or redu-
cing unnecessary costs (Schmitt et al., 2010), exploitation
alone will not enable a firm to obtain new, diverse and
increased sources of revenue. Although exploitation capabil-
ities are needed, exploration may help to overcome inertial
answers and will increase the likelihood of aligning the firm
with the environment change (Schmitt et al., 2010). SMEs
that invest in exploration gain new knowledge, support novel
proposals and are capable of applying their knowledge and
technologies to new markets and products (Schmitt et al.,
2010).
The need for an ambidextrous response capacity is rec-
ognized in the literature which analyzes the development
of specific strategies for survival, known as turnaround
strategies. According to Schmitt and Raisch (2013), the
turnaround strategies of retrenchment and recovery are
contradictory as well as mutually enabling. In fact, these
authors suggest that turnarounds need to involve both
retrenchment and recovery, as an initial focus only on
retrenchment may decrease the firm’s innovation capacity,
and restrict or inhibit effective recovery activities. There-
fore, firms undergoing turnarounds that are able to initiate
retrenchment activities and use their savings for overlap-
ping recovery activities are more likely to survive. Some
studies on ambidextrous large firms offer evidence coher-
ent with this statement. Piao (2010) argues that although
exploration and exploitation may compete for resources at
certain points in time, exploitation can generate resources
that can be used for future exploration (Lavie et al., 2010).
In order to adapt to environment changes, SMEs need to
overlap between exploitation and exploration (Brown and
Eisenhardt, 1997). To survive, these firms must work to effi-
ciently identify and capture new opportunities in order to
prevent organizational inertia and the negative effects of
path dependence (Simsek et al., 2009).
Ambidextrous SMEs have developed internal processes
and managerial capabilities to deal with exploitation and
exploration, to improve efficiency without losing the capa-
bility to develop novel, uncertain and innovative ideas,
products and processes. As a result, ambidextrous SMEs are
more skillful and quicker than exploitative firms at sensing
the changes of a financial and economic crisis and are able
to seize recovering options, making important and quicker
decisions about their financial structure for survival and/or
making decisions about reassigning key assets in order not
just to retrench but to recover (e.g. looking for new and
different markets through internationalization or through
launching new products or brands).
In the long term firms may find it necessary to simul-
taneously engage in exploration and exploitation (Jansen
et al., 2006). While in the short-term SMEs may benefit
through focusing on exploitation or exploration, this will
affect them negatively in the long term. As some stud-
ies have shown, a focus on exploitation activities (e.g.
efficiency) tends to come at the cost of exploration activi-
ties (e.g. innovation), which results in a competency trap.
That competency trap, in turn, leads to long-term stagna-
tion and profitability problems (Levinthal and March, 1993;
McNamara and Baden-Fuller, 1999; Smith and Tushman,
2005). Similarly, a focus on exploration activities leads to
a failure trap because new ideas remain underdeveloped
(Levinthal and March, 1993). According to March (1991),
the firm’s survival over time relies on its ability to exploit
existing assets while simultaneously exploring new ideas, as
well as on its efficiency, flexibility, adaptability, and align-
ment. O’Reilly and Tushman (2013: 326) review the evolution
of ambidexterity research and conclude that ‘‘in uncertain
environments, organizational ambidexterity appears to be
positively associated with increased firm innovation, better
financial performance, and higher survival rates’’. In this
regard, we suggest the following hypothesis:
Hypothesis 4. In an environment of financial and economic
crisis, SMEs’ ambidexterity is positively related to survival.
Methods
Sample and data collection
In the selection of the sample, we looked for homogenous
industries strongly hit by the international crisis, and with
easy access to information on their companies. We used
the ORBIS®database3to discern the relevant population in
the focal region (Valencian Community), a mature, Span-
ish, low-tech, industrial region surrounding the authors’
research center. The severity of the international crisis
in the chosen area and in the type of company analyzed
(manufacturing firms) has been enormous.4On the other
hand, the manufacturing sector in Spain is one of those
with the highest proportion of family businesses (Corona,
2015), which makes it especially attractive for studies that
consider this business characteristic. The study population
included 814 SMEs with 20 to 250 employees that were
active in the manufacturing sector and were not strate-
gic business units of other firms. From July 2009 to May
2010, firms were invited to participate in a national research
project on SME governance, strategy, and performance via
an omnibus survey (administered questionnaire). Of these
organizations, 113 agreed to participate in the survey and
provided complete information for this paper, which is a
response rate of 13.88%, similar to rates seen in other sur-
veys of top executives in SMEs (e.g., Escribá-Esteve et al.’s
[2008] study reports response rates of 6---21%) and the
size of the sample is similar to those used in studies of
3ORBIS®is an online database compiled by Bureau Van Dijk.
4Between 2007 and 2010, the Spanish economy lost 1.8 million
jobs. In relative terms, the industrial sector has suffered a greater
impact on employment than the agricultural or service sectors dur-
ing those years (Alcaide, 2011). The crisis has been especially hard
in the Valencian Community, with a reduction in GDP between those
years of −2.10% compared to the national average of −1.95%, and
an increase in the unemployment rate of +14.53%, compared to the
national average of +11.82% (Sánchez et al., 2013). This greater
relative impact has also been observed in the mortality rates. For
example, in 2009, the mortality rate of companies in Spain was
9.46%, strongly surpassed by the Valencian Community, with 10.75%,
and only exceeded by two of the 17 Spanish autonomous regions
(INE, 2011).
Improving the likelihood of SME survival during financial and economic crises 127
family-firm TMTs (Binacci et al., 2016; Minichilli et al., 2010;
Wiersema and Bantel, 1992).
To test our hypotheses, data were collected through the
omnibus survey and from archival sources during different
periods (see Table 2). To mitigate the potential for com-
mon method bias, data on the dependent variables were
collected from external sources (Podsakoff et al., 2003).
Thus, data on organizational ambidexterity and firm survival
were obtained from the ORBIS®database. Family ownership
data were collected from the same database because this
variable was not included in the omnibus survey. Data on
TMT characteristics, firm performance, solvency and size
(full-time or equivalent employees) were collected from the
survey responses.
Variables and measures
Our dependent variables are firm survival and organiza-
tional ambidexterity. Firm survival is a classic measure of
the long-term performance of companies (Friedlander and
Pickle, 1968; Gibson et al., 1973; Steers, 1975; Thompson
and McEwen, 1958). In general, it is considered to be
the ultimate proof of long-term success (Josefy et al.,
2017), a test of the permanent adaptation to the business
environment (Aldrich, 1979; Hannan and Freeman, 1977;
Kanter and Brinkerhoff, 1981), widely used as a dependent
variable in studies on change and adaptation (Romanelli and
Tushman, 1994). According to Josefy et al. (2017), the lit-
erature uses a broad set of terms to refer to organizational
survival, including mortality, death, market exit and failure,
which are used to reflect a number of meanings such as dis-
continuation of operations, bankruptcy or discontinuity of
ownership. The first meaning of survival (operations dimen-
sion) captures the continuation or cessation of a company’s
activity in a given market environment, as well as being the
dimension that drives the definition of firm death or failure
more prevalent in the management literature, particularly
regarding undiversified firms (Josefy et al., 2017). These
authors observe that scholars have studied operationalized
survival with various measures of mortality such as market
exit, bankruptcy or discontinuation of operations, rather
than measures such as number of years a company survived
after a baseline or the overall lifespan of a firm. Thus,
in our research the classification of survived versus failed
firms (coded with 1 and 0, respectively) was based on the
classification of the active versus bankruptcy/liquidation
status marker of firms from the ORBIS©database. Sur-
vived firms were identified based on their active marker,
which indicates that they have not experienced an event
of failure. The companies that appeared in bankruptcy
were classified as failed firms, since the rehabilitation
rate of companies in our focal area which have filed for
bankruptcy is less than 6% according to national statistics.
The companies that appeared as liquidated or in liquidation
were marked as failed. On the other hand, we verified that
no company ceased its activity because another company
acquired it. The measurement of the active status was
made in two different moments of time: December 31, 2012
and December 31, 2015, which is just before the end of the
international crisis and two and a half years after the crisis
had passed. The first year (i.e. 2012) ended with 72.57% of
active companies, and the second year (2015) with 69.91%.
All companies were active at the time of data collection
via questionnaire (May 2009---May 2010).
In order to increase the robustness of our findings, we also
report our main analyses using the bankruptcy probability
of a company at the end of 2012 and 2015 as criterion vari-
able, measured with the Altman Z-score for private firms, a
procedure previously used for model bankruptcy and finan-
cial distress in SMEs (Altman and Sabato, 2007; McGuinness
et al., 2018). Distress was modeled as a binary choice equal
to 0 if a firm was classified as distressed using the Z-score
cut-off (1.23), and equal to 1 otherwise.
Organizational ambidexterity acts as a dependent and
independent variable. It was measured as an aggrega-
tion (sum) of standardized indicators of exploitation and
exploration (see Lubatkin et al. (2006) for a similar
aggregation approach). We used objective data obtained
from secondary sources in order to reduce bias in the
exploration/exploitation data (Sarkees et al., 2014). A
fundamental dimension of exploitation is the search for effi-
ciency, which usually uses as a proxy labor-cost reduction
(Moon and Yim, 2014). Thus, we measured exploitation using
the ratio of total labor costs to total sales, which is a com-
mon labor-efficiency ratio. Exploration was measured as the
number of patents obtained (Sarkees et al., 2014) and the
number of new brands, as these two variables are associ-
ated with the creation of new products (Tollin and Schmidt,
2015), especially in manufacturing SMEs. In all the varia-
bles we averaged the five-year data (2006---2010) in order to
capture a solid orientation in each one of them.
In terms of the independent variables, we followed
the specialized literature (Camelo-Ordaz et al., 2005;
Fernández-Mesa et al., 2013; Jaw and Lin, 2009) that mea-
sures diversity using the coefficient of variation (standard
deviation divided by the average) for the tenures of TMT
members at the firm. We measured age diversity as proxy of
tenure diversity in a career, and seniority in the firm as proxy
of tenure in a position. The TMT tenure diversity variable
was constructed as the sum of the standardized coefficients
of variation of the seniority and age variables. Higher figures
indicate greater tenure diversity. Finally, to measure fam-
ily ownership, we adopted an objective ownership measure
based on the percentage of ownership held by a single fam-
ily. In order to unambiguously capture the owners’ ability to
exercise control, the variable took a value of 1 when fam-
ily members owned or controlled at least 51% of the voting
stock (84.96% of the companies in the sample) and a value of
0 when the stake held by family members was less than 51%
(Binacci et al., 2016; Ibrahim et al., 2009; Van Der Merwe,
2009).
We also included control variables. As in other research
on ambidexterity and on firm survival and failure (e.g., Cao
et al., 2010; Haveman, 1993; Heavey and Simsek, 2014;
Jansen et al., 2008; Lubatkin et al., 2006; Pertusa-Ortega
and Molina-Azorín, 2018; Thornhill and Amit, 2003), we con-
trolled for TMT size, firm size (natural log of employees),
firm market (sales and market share), financial (ROI) per-
formance, and firm solvency. All of these variables were
captured through a questionnaire. The measures of perfor-
mance and solvency have been obtained from a 5-points
Likert scale where 1 = ‘‘much worse than my competitors’’,
3 = ‘‘equal to my competitors’’, and 5 = ‘‘much higher than
128 C. Dolz et al.
Table 2 Variables and data sources.
Variable Type of variable Collected Source
Firm size Control variable 2009/2010 Survey
Firm market performance Control variable 2009/2010 Survey
Firm financial performance Control variable 2009/2010 Survey
Firm solvency Control variable 2009/2010 Survey
TMT size Control variable 2009/2010 Survey
TMT tenure diversity Independent variable 2009/2010 Survey
Family ownership Independent variable 2010 Archival data
Ambidexterity Dependent variable 2006 to 2010 Archival data
Firm survival Dependent variable December 2012 and 2015 Archival data
Controls
Firm
survival
Organizational
ambidexterity
TMT tenure
diversity
Family
ownership
Figure 1 Hypothesized model.
my competitors’’. The market performance is constructed
as an average of the Likert scales for sales and market
share. Table 2 shows the variables of the study along with
its sources and when they were obtained.
Analyses and results
Given the existence of two dependent variables, we esti-
mated the whole model by applying structural equation
modeling (SEM) techniques, using the maximum likelihood
method. In addition, in order to perform additional sta-
tistical tests, we estimated the partial models, one for
each dependent variable, using OLS for ambidexterity and
binary logistic regression for firm survival. The full model
shown in Fig. 1 indicates the theoretical relations taken
from our study of the literature; Tables 3 and 4 provide
the descriptive statistics and the path-analysis results (SEM);
and Tables 5 and 6 show the results for the partial models.
None of the correlation coefficients or computed
variance inflation factors suggest potential problems of mul-
ticollinearity. To control for endogeneity, we studied the
correlation between the independent variables and the error
term of the regression models and we can conclude that
there is no endogeneity problem in our study (Bascle, 2008;
Hamilton and Nickerson, 2003).
Table 3 shows the means, standard deviations, and
correlations of the variables included in our analyses.
Table 4 reports the structural model results obtained from
path analysis using AMOS/SPSS®software. In this table
we present the results of four models which test the
relationships shown in Fig. 1. Models 1 and 2 introduce
ambidexterity and firm survival as dependent variables.
The firm survival variable took a value of 1 if a firm was
active or 0 if it was not active in two different moments of
time: December 31, 2012 and December 31, 2015. Models
1and 2change the firm survival measurement from active
status to the Altman Z-score, an indicator that predicts
bankruptcy. These models are reported as additional tests
to verify the robustness of the empirical study. All models fit
the data, with non-significant 2and goodness fit indicators
within the usual parameters required by the literature.
Moreover, these models have good predictive capacity,
as the R2observed are high for the dependent variables
(28% for ambidexterity and from 21% to 32% for firm
survival).
Our results support the hypotheses of this study (Table 4).
Hypothesis 1, which states that tenure diversity in TMTs has
a positive effect on ambidexterity, is positive and statisti-
cally significant (ˇ= .20, p< .05), as predicted. Hypothesis
2proposes that family ownership is negatively related to
ambidexterity. The effect is negative and statistically signif-
icant (ˇ=−.19, p< .05), as expected. Hypothesis 3, which
suggests that family ownership has a positive effect on a
firm’s survival, is robustly supported in all the models (ˇ∈
[.21, .25], p< .05). Hypothesis 4 states that ambidexterity
is positively related to a firm’s survival and is strongly sup-
ported in the four models studied (ˇ∈[.19, .33], p< .05).
Regarding the control variables, firm size and firm solvency
do appear to be predictors of ambidexterity and a firm’s
survival, respectively.
Tables 5 and 6 present additional statistical tests for the
partial models in which we only consider one dependent
variable. Table 5 summarizes the study of ambidexterity as a
dependent variable via ordinary least squares. We show two
models, one that includes only the control variables, and
another one that includes control and independent varia-
bles. The full model is significant, with a high R2, which
significantly exceeds the adjusted R2of the model of con-
trols; the independent variables (TMT tenure diversity and
family ownership) are significant and have the predicted
direction. These results are consistent with our path analysis
reported in Table 4.
Table 6 shows the study of firm survival as a dependent
variable via binary logistic regression. Four groups of models
are shown. The first two measure survival with a dichoto-
mous variable that takes the value of 1 if the company
was active in 2012 and in 2015. If it was not active (dis-
solved or bankrupt), the variable takes the value of zero.
The two groups of models first present the regression with
the control variables and then the regression with all the
Improving the likelihood of SME survival during financial and economic crises 129
Table 3 Descriptive statistics.
Variable Mean S.D. 1 2 3 4 5 6 7 8 9 10 11
1. Firm survival (active 2012) .73 .45
2. Firm survival (active 2015) .70 .46 .81
3. Firm survival (2012 Altman Z-score) .58 .50 .65 .66
4. Firm survival (2015 Altman Z-score) .56 .50 .65 .74 .80
5. Ambi