Samenvatting

Early 20th century management literature was very decisive about the role of efficiency; it was the ‘one best way’-criterion for organizational decision-making. This paper shows by means of a backward prediction that efficiency was indeed an important measure for organizations in the early 20th century. In this paper we view profitability as an indicator of the efficiency of a firm. It is suggested that positive efficiency in relation with the development (i.e. growth) of a firm contributes to survival, and that negative efficiency in relation with a drop in size predicts bankruptcy. This result supports the insight of early management literature, and offer a research design to repeat comparable studies for present companies.
This result is also in line with several studies that measure a range of variables (profits, sales figures, shareholder value) of a certain year to predict future viability of a firm. Our research adds to this snapshot method a longitudinal insight that offers an explanation for a firm’s slide into bankruptcy where others may survive.