A Panel Logit Analysis for Estimating the Closure Risk of Interior Design Firms

The energy crisis and climate change make it unsustainable to demolish and rebuild old buildings. Interior design companies are essential in reusing and repurposing existing structures. Therefore, it is timely to support the survival and growth of this industry. To this end, we applied the fixed-effects panel logit regression model to analyze the factors that influence the survival of firms in the Korean interior design industry. Prior to the analysis, we corrected the heterogeneity of variables between closed and performing firms on the basis of firm size through propensity score matching. We utilized unbalanced panel data of 36 firms (17 performing and 19 closed) from 1995 to 2023 to empirically examine the impact of financial indicators and strategy variables. In particular, we focused on the effect of a diversification strategy on firm survival. The results show that the diversification strategy, asset growth rate, and sales growth rate significantly increase the probability of survival, whereas firm size has a negative effect on the probability of survival. This suggests that dynamic growth and strategic flexibility are important factors for firm survival. Our study has policy and strategic implications for enhancing firms’ sustainable growth in project-based and unstable industries, such as the interior design industry.