The impact of the global crisis on the growth of SMEs: A resource system perspective

Abstract

In this commentary, we examine both the positive and negative potential impact of the COVID-19 pandemic on the growth of small- and medium-sized enterprises (SMEs). We conceptualise the firm as a system of various resource components (strategic, physical, financial, human and organisational resources) and firm growth as the expansion of this resource system. Based on qualitative data drawn from Canadian high-growth SMEs, we discuss the potential impact of the crisis on these resource system components. We demonstrate how virtuous growth spirals of these resources co-evolve through various feedback and feed-forward loops. Furthermore, we discuss how a temporary growth setback, due to the crisis, can in fact provide an opportunity for entrepreneurs to realign, and regain the balance and fit within their firm’s resource system. This realignment enables the firm to take on the next phase of growth.

Investigating strategic responses of SMEs during COVID-19 pandemic: A cognitive appraisal perspective

“…Insights offered by recent research in this area indicate that the current economic crisis caused by the COVID-19 pandemic is also significantly disrupting the liquidity and solvency of SMEs ( Cowling et al, 2020 ). In line with previous studies, Greene and Rosiello (2020) argue that the crisis caused by the COVID-19 pandemic, in addition to threats, will create opportunities for many SMEs to reconfigure resources for future growth ( Lim et al, 2020 ). However, the underlying explanations for these differences remain limited to this day ( Trahms et al, 2013 ), suggesting the need to explore the psychological processes that underlie SME decision making during crises.…”

“…Inspired by that very event, studies show that (1) SMEs witnessed reduced employment and reduced growth ( Cowling et al, 2015 ; Varum & Rocha, 2013 ), (2) larger firms are able to recover more quickly than SMEs ( Peric & Vitezic, 2016 ), and (3) new venture creation stagnates ( González-Pernía et al, 2018 ). Research insights into the resilience of small business during crises are still emerging ( Doern et al, 2019 ), and some recent studies observe that SMEs are heterogeneous and consequently differ in how they approach the economic crisis caused by the COVID-19 pandemic ( Lim et al, 2020 ). In this regard, some studies report that small entrepreneurial firms are not directly impacted by the negative effects of an economic crisis ( Davidsson & Gordon, 2016 ), which can be attributed to the strong opportunity recognition capacity that these firms nurture ( Beliaeva et al, 2020 ; Devece et al, 2016 ).…”

Standing up against crisis-induced entrepreneurial uncertainty: Fewer teams, more habitual entrepreneurs

“…Thorgren and Williams (2020) have already called for more evidence on the interplay of entrepreneurial team characteristics and entrepreneurial crisis management, and the present commentary answers to this call. Obviously, any crisis may have both positive and negative impacts (Lim et al, 2020), and it seems promising that despite the decline in innovative entrepreneurial activity, entrepreneurs are still active and embrace discovery-driven approaches as one option to manage risk (Manolova et al, 2020). These are the ventures that potentially contribute to the proverbial ‘new normal’ that will follow the COVID-19 crisis.…”

“…However, the main focus of this emerging research stream has been on entrepreneurs and startups (and Small and medium-sized enterprises (SMEs), for example, Lim et al, 2020) that were active prior to the crisis and how they are affected. Some have already criticised this approach for being too focused on entrepreneurial resilience (Greene and Rosiello, 2020), thereby neglecting opportunities for growth and new ventures that might follow from the crisis.…”

Impact of the COVID-19 crisis on SMEs and possible innovation responses

“…In terms of impact on the individual business segments, some of these industries even recorded positive pandemic effects. Lim et al [23] also suggest that the pandemic has had twofold effects, analyzing both positive and negative impacts of the COVID-19 pandemic on the growth of SMEs. In our sample, there were no negative effects on the organization of business activities in the education industry.…”