Exogenous shocks and the adaptive capacity of family firms: exploring behavioral changes and digital technologies in the COVID‐19 pandemic

Abstract

The COVID‐19 pandemic has been and is currently still affecting organizations of all sizes and in many industries, and research still lacks profound insights into the managerial implications of this phenomenon. In particular, it is unclear how family firms, which are the economic backbone of most of the countries affected by the pandemic, have adapted to COVID‐19. This paper addresses this gap by drawing on a rich body of evidence collected from 90 interviews and secondary data in a longitudinal case study of four German family firms. We develop a framework for understanding how family firms adapt to exogenous shocks such as the COVID‐19 pandemic and find that the exogenous shock further reinforces the family firm’s resource constraints and the family’s fear of losing their socioemotional wealth. These motivational sources, in turn, trigger behavioral changes in both the firm and the family. In addition to a temporarily induced short‐term orientation, these changes manifest in (pseudo)family cohesion, less rigid mental models, and the utilization of digital technologies. Organizational outcomes such as new alliances, digital platforms, and the adaptive capacity of family firms are the result of these behavioral changes. By providing a comprehensive understanding of how COVID‐19 affects family firms, the insights from our study contribute to innovation research, business practice, and policymaking alike. More broadly, we provide innovation scholars with a theoretical comprehension of how exogenous shocks can challenge our canonical understanding of organizations’ (innovative) behavior.

COVID-19 Interruptions and SMEs Heterogeneity: Evidence from Poland

“…Our fourth hypothesis stated that COVID-19 interruptions are perceived as more severe by family firms. However, this hypothesis found no support and provides empirical evidence that does not support the view that family firms differ from non-family ones if the crisis or resilience to shock is considered, which is contrary to the findings of a more et al (2021), Salvato et al (2020), andSoluk et al (2021). First, we observed that statistically significant differences were confirmed between family and non-family firms only in the case of the perception of limited availability of workers and ability to continue production.…”

“…On the other hand, Vlados et al (2021) suggested that in economies where most firms are family-owned, there is a risk of poor management and problematic strategic and technological comprehension, which may undermine an economy's ability to overcome economic crises through innovative and entrepreneurial thinking and adaptability. Soluk et al (2021) found that an exogenous shock (such as COVID-19) further reinforces the family firms' resource constraints and the family's fear of losing their socioemotional wealth. Family-centered non-economic goals and ensuring preservation of socioemotional wealth are regarded as the primary drivers of decision-making in family businesses (De Massis and Rondi 2020).…”

“…It is very common that SMEs perform as family firms. Overall, there is rich evidence that family firms behave differently to non-family firms and that family firms remain more long-term oriented, less risk-taking (more conservative) and less concerned about the growth rate (Habbershon et al 2003;Lubatkin et al 2007;Kraus et al 2020;Soluk et al 2021). The existing literature evidence on how family firms differ from non-family ones if we consider the impact of crisis provides ambiguous results.…”

SMEs and exogenous shocks: A conceptual literature review and forward research agenda

“…While emerging research on innovation and decisive managerial change grounded in risk-taking under crisis correlates positively with success compared to peers (Breier et al, 2021; Kawagatchi et al, 2021; Leppäaho and Ritala et al, 2021; Soluk et al, 2021), change for the sake of change under crisis is not necessarily always positive for the future and is heavily context dependent. Clampit et al (2021) found in a study of 338 American SMEs that firms employing dynamic capability models recovered more quickly and strongly than their peers, with the greatest benefit, perhaps counter-intuitively, for the smallest firms.…”

Mobilisation of survivability capital – family firm response to the coronavirus crisis

“…Family business reactions to the COVID-19 pandemic A growing body of research explores the family effect on the businesses' responses to pandemic threats (e.g. Amore et al, 2020;Kraus et al, 2020;Zainal, 2020;Zajkowski and _ Zukowska, 2020;Marja nski and Sułkowski, 2021;Rivo-L opez et al, 2021;Soluk et al, 2021).…”