COVID 19 and the Business Management Crisis: An Empirical Study in SMEs

Abstract

The COVID-19 pandemic has forced many firms to close, causing an unprecedented interruption in trade in most sectors of economic activity worldwide. Although global supply chains have been affected by the general lockdown, due to their particular characteristics, small and medium-sized enterprises (SMEs) have been hit most severely by the measures implemented to prevent the spread of the virus. This study aims to determine how these firms coped with the disruption caused by the closure, in terms of population and their daily lives to carry out their economic activities. For this purpose, a qualitative methodology (descriptive and inductive) was used through the use of snowball sampling with a questionnaire in Portugal during the lockdown. The results obtained show that SMEs face a series of difficulties from interrupting their operations, which has caused serious liquidity problems, with effects on their future continuity and maintaining jobs. Additionally, it showed the importance of government measures to support these firms today and in the future, although the number of firms adhering to them is considerably affected by the eligibility criteria and the speed of institutions’ response. The main contribution of this research lies in confirming that the weaknesses in SMEs are the principal obstacle to a resilient response to this crisis, such as their limited liquidity, human resources, digitalization, and use of information technology. These weaknesses and/or threats had already been indicated in the various theoretical currents stemming from Organizational Theory, so the originality of this contribution lies in the fact that the managers of these SMEs are endowed with other skills and characteristics, such as, for example, dynamic capacities to manage business in an unparalleled crisis and to continue their operations, even when faced with a global blockage. Implications for theory and practice, limitations, and suggestions for future research are also presented.

What Kept the Boat Afloat? Sustainability of Employment in Knowledge-Intensive Sectors Due to Government Measures during COVID-19 Pandemic

“…Our results contribute both to the literature on the resilience of SMEs [3,18,32,36,46], as well as to the literature on knowledge-intensive entrepreneurship [50], crisis management, and the effectiveness of state interventions during economic shocks [37,54,55].…”

“…However, our survey results on the case of the post-socialist economy in transition do not suggest that innovation capacity was the main driver of adaptation of knowledge-intensive SMEs to lockdown issues during the pandemic. Swift adaptation measures on the side of business owners and top management, and thus managerial resilience [32,46,47], appears to be a more significant driver of venture stabilization in terms of employment retention. It is true of almost all companies in our sample that they either suspended innovation processes, postponed the acquisition of planned technologies, or limited internal scientific research activities due to fears of uncertainty [13,14].…”

“…A broad consensus exists that the destabilization of small and medium-sized enterprises in the economy will significantly disrupt the social development of the territory [29], mainly due to a negative impact on employment [30]. During the tightening of lockdown measures, especially in the period of absence of a vaccination, small and medium-sized companies faced temporary closures, ensuring mandatory testing, an introduction of sanitary measures, logistics outages, a loss of suppliers, reduced demand for their products, and many other consequences of the crisis [31], which were reflected not only in turnover, but also in employment levels [32].…”

“…The set of business attributes leading to overcoming the negative consequences of crises is referred to as resilience, which has behavioral (personal resilience of employer and employees), managerial (managerial response to uncertainty and capitalization of opportunities), and capacity-based (entrepreneurial actions within available resources) aspects [32,46,47]. In our empirical study, we will contribute in particular to understanding the resilience of SMEs during a pandemic in a managerial context-that is, their ability to adapt quickly to change through internal policies combined with the ability to use state compensation instruments, as it appears that the crisis management of business owners has a decisive impact on firm survival during a pandemic [48].…”

“…To justify the formulation of our hypotheses, our clearly formulated intention to examine the impact of crisis management tools on the capability to retain the level of employment in SMEs during the pandemic led us to formulate "internal tools and policies" for mitigating the negative effects of the crisis based on practices cited in the available literature [31,32,34,51]. The hypothesizing itself was based mainly on the assumption that the management procedures that were used relatively frequently could have a positive impact on the stability of a venture.…”