This research endeavors to expand the institutional lens on retrenchment decisions within SMEs, encompassing diverse facets such as employee and asset retrenchment. We empirically analyze retrenchment decisions among a sample of firms in the Rhône-Alpes region from 2005 to 2014. The results highlight the significant influence of factors such as the business climate, the firm's financial situation, and observed retrenchment practices among industry leaders. These factors distinctly contribute to shaping the retrenchment preferences of firms. Notably, the influence is particularly pronounced in employee retrenchment, revealing a heightened sensitivity to mimetic logic. These outcomes incite nuanced reflections across three pivotal dimensions, shedding light on intricate intersections within the institutional landscape of SME retrenchment decisions.
This study delves into the complex landscape of business restructuring, focusing on the significant challenges posed by bankruptcy, particularly for small and medium-sized enterprises (SMEs). Retrenchment, a crucial strategy in existing literature, involves cost-cutting measures and employee downsizing, while insolvency proceedings provide a legal avenue for comprehensive financial restructuring. Using a bivariate probit model, our Analysis explores the interdependence of these strategies and their impact on firm survival. Drawing on a dataset from firms in the Rhône-Alpes region, the study reveals consistent negative associations between sales, profitability, and availability with the initiation of both insolvency proceedings and retrenchment. Supplier liabilities, on the other hand, exhibit a positive association with both strategies. The Analysis identifies shared explanatory variables, confirming the correlation between insolvency proceedings and retrenchment. Moreover, the study unravels a reciprocal causal relationship between these strategies, providing valuable insights for navigating the intricate landscape of business restructuring.
