The more things change, the more they stay the same: Demand‐side responses to economic shocks
Knudsen, E. S., Lien, L. B., Timmermans, B., & Wuebker, R. (2022). The more things change, the more they stay the same: Demand‐side responses to economic shocks. Managerial and Decision Economics, 43:5, 1240-1255
Paper that investigates how firms respond to the recession of 2008-09 in terms of their product market behaviors. Key insight is that firms tend to do more of the same as they did prior to the recession, rather than making more dramatic changes to their product market strategies.
When demand drops in an economic crisis, managers rely on an arsenal of demand-side responses to retain existing customers or attract new ones. However, some strategic responses are likely to be more effective than others. Furthermore, the most effective strategic response presumably depends on firm-specific characteristics that are often elided in theorizing and empirical work. We rely on a survey on strategic responses of Norwegian firms during the Great Recession and investigate demand-side responses of Norwegian CEOs. Findings indeed demonstrate that characteristics like the size of the demand shock and the pre-recession strategy determine demand-side responses during an economic recession.