An Empirical Analysis of External and Internal Factors Affecting Manufacturing Firm Failure and Resilience

ABSTRACT We develop machine learning models that incorporate both external (deterministic) and internal (voluntaristic) factors affecting firm failure and survival. Using structured and unstructured data, we empirically investigate the external and internal factors that affect the US manufacturing firms’ business failure. We also examine how the interactions between external shocks and firm responses impact business failure. Our findings indicate that while external factors can significantly impact the likelihood that firms fail, specific management responses to these challenges can effectively mitigate the negative effects and contribute to firm survival.