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.