Braking before the curve and accelerating inside? Exploration, countercyclical behavior, and SMEs' resilience during economic downturns

Some studies have provided empirical evidence that firms' high growth rates just before economic crises are negatively associated with resilience. Other authors have observed that firms that grow fast in the early phases of an external crisis are generally more resilient. This countercyclical behavior is less common in small- and medium-sized enterprises (SMEs), and literature has not delved into the underlying factors that facilitate SMEs' countercyclical strategies. Firm exploration is defined as a firm's willingness to experiment, take risks, be flexible, and accept variation. Our thesis is that exploration acts as a countercyclical factor by slowing down a firm's growth before the external shock takes effect, favoring growth during the crisis, and providing better resilience outcomes. We find support for our hypotheses from a sample of 2,081 manufacturing medium-sized enterprises.