COVID-19 and Entrepreneurship

Challenges and Opportunities for Small Business

Vanessa Ratten

• Publisher: Routledge
• Year: 2021
• Print ISBN: 9780367710873
• eBook ISBN: 9781000383881
• Topic: Business
• Subtopic: Business General
• Index: Business

Amid the COVID-19 pandemic, small businesses are especially vulnerable. This is one of the first books that explicitly examines the linkage between crisis and entrepreneurship with a specific focus on small businesses.

The book adopts a holistic approach and outlines strategies that small business owners can utilize as well as business opportunities that are available in these new market conditions. It also provides a comparative analysis of the current and future market conditions to enable a better understanding of how institutional structures can facilitate or hinder growth. The book also goes on to explain why and how creativity and innovation can help to mitigate the impact of such a crisis on business and highlights why business continuity is especially crucial to family-owned businesses.

This timely publication will help to guide small business owners and entrepreneurs to maintain business continuity and build up their resilience in a challenging business climate.

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COVID-19, entrepreneurship, and small business

Vanessa Ratten

Introduction

Since the start of the COVID-19 pandemic in January 2020, small businesses have had to significantly change in order to survive (Heyden, Wilden and Wise, 2020). Many small businesses have had to terminate full-time employees or change working relationships due to COVID-19. This has resulted in a significant number of individuals working from home or reducing their normal work hours. COVID-19 is a new crisis that has affected small business like nothing else in recent history (Cortez and Johnson, 2020). In general terms, the COVID-19 crisis is about the challenges and opportunities small businesses in particularly face from changed environmental conditions. The challenges arise from the need for social distancing and online capabilities along with the emotional changes in human behavior, while the opportunities refer to new market needs (Donthu and Gustafsson, 2020). To support better and more timely decision-making in the COVID-19 crisis, small businesses need to rethink their current market strategies to create solutions for COVID-19-related problems (Kraus, Clauss, Breier, Gast, Zardini and Tiberius, 2020).

As the role of small business is integral to the success of the global economy, it is important to understand how the COVID-19 crisis has changed society. Due to the COVID-19 crisis, there is an opportunity and a need for small businesses to redefine who they are and what markets they serve. This opportunity needs to be addressed as small businesses face significant challenges. What is the way forward for small business? Small businesses need to confront the issues raised by the COVID-19 crisis. This may involve redefining the purpose of small business in light of the crisis in terms of how they sell and source products or services. Small businesses have special qualities that can be vital to the survival of a community, but they need to be prepared for change. Those who work for and in a small business are confronting numerous challenges, but by having a positive attitude, they can survive and prosper from the crisis. This means they need to be aware of the conflicts and dilemmas faced by small business by utilizing an entrepreneurial mindset.

Small businesses are a central part of entrepreneurship studies and there is a large body of literature existing on this topic. The research on COVID-19 and small business is new and only now emerging due to the significance of the pandemic on society (Kuckertz, Brändle, Gaudig, Hinderer, Reyes, Prochotta and Berger, 2020). Small businesses are a significant economic force and play a key social role in society. This means that COVID-19 and small business are a subject worthy of consideration and inquiry due to how it has changed business practices.

Although the impact of the COVID-19 pandemic on entrepreneurship is obvious, it seems necessary to explain it in more detail. This will allow further elaboration on what factors persuade small businesses to adopt a cooperative approach to entrepreneurship. The questions then worth asking and that are answered in this book are: how do small businesses utilize cooperative entrepreneurship during the COVID-19 pandemic and how is it distinguished from other types of entrepreneurship? In this chapter, it seeks to bring together extant work on COVID-19 and entrepreneurship by advancing the research on this topic. This chapter highlights the changes in entrepreneurship practice caused by COVID-19 and how entrepreneurial activities will change. The chapter also discusses how small business entrepreneurship will change in the future by providing an overview of the challenges faced by small businesses in the COVID-19 pandemic. This will enable a better understanding of the role of small business in the global economy and the impact of entrepreneurship in times of crisis. It also provides a discussion on the small business sector and its ability to respond to environmental change.

Nature of small business

Small businesses have advantages over large businesses due to the more interactive nature of relationships within the business structure (Santos, Marques and Ratten, 2019). This enables faster and more direct contact between owners, employees, and customers. At the same time, there are also disadvantages associated with small businesses due to their resource-constrained environment (Scase, 2012). Small businesses are able to serve niche markets not served by large businesses. This enables a closer connection to communities in terms of the types and kinds of products or services offered. Large businesses often operate on mass production models and are unable to specialize. This means that unlike large businesses, small businesses can offer smaller sized quantities of products and more individualized service (Anggadwita, Ramadani, Luturlean and Ratten, 2016). This enables products to be quickly adapted on the basis of consumer needs.

Small businesses comprise the majority of all enterprises in society and contribute significantly to the economic growth rate. There is no universally accepted definition of small business as it normally depends on the context. Definitions can vary based on the way small businesses are understood in the economy. Generally small businesses can be defined on the basis of the number of employees and turnover. This means businesses are considered small when compared to larger businesses they have less employees and assets. Although some view a small business as being an enterprise that is independently owned and managed.

Businesses are classified as being small when they have a lower level of employees and revenue than other businesses. Small businesses vary in terms of regulation depending on their geographic position. Small businesses that have a physical store or office location are governed by local regulations. Increasingly, small businesses that are digital based can operate from any location and are more difficult to regulate. In addition, during the COVID-19 pandemic, more small business owners and employees are working from home. Some small businesses do not have a growth motive and are happy with their current market position. The advantage of small businesses is that they can be started at a low cost and develop based on market need. This means initially the development of a small business will be a response to market conditions that determine if it increased in size or stays the same. Individuals are motivated to start a small business because it brings them financial revenue while pursuing market opportunities.

Small businesses are characterized by their normally independent nature in the marketplace. This means they are mostly operated by owners and do not have a dominant market position. Small business owners normally rely on their business as their main source of income. This means the business consumes the majority of the owner’s time and energy. It is necessary to define a small business in order to clear about how it is affected by the COVID-19 pandemic and entrepreneurship. A small business is classified as a business with ownership held by an individual or a small group of individuals. This means their operations are mostly local and they contribute to the development of a community.

The majority of small business owners work on a full-time basis in the business. Most discussion on COVID-19 has focused on business in general without considering the intricacies of the small business sector (Alon, Farrell and Li, 2020). This means the existing literature on COVID-19 and entrepreneurship takes a predominately general perspective. More attention is needed on how small business owners have responded to the COVID-19 pandemic and the entrepreneurial decisions they have made. Measuring the resilience of small businesses during the COVID-19 pandemic is important (Bacq, Geoghegan, Josefy, Stevenson and Williams, 2020). The ways small businesses have been entrepreneurial will be based on the personal circumstances of the owners and their ability to adapt. With this in mind, this book will seek to explore the following questions related to COVID-19, entrepreneurship, and small business.

Small businesses often are started for low cost and on a part-time basis. Sometimes the reason for starting a small business involves pursuing a hobby or interest that can also produce an economic income. These small businesses are referred to as lifestyle businesses due to the way they combine lifestyle pursuits into financial outcomes. The internet has changed the way small businesses compete in the global marketplace as it has made it easier for them to advertise and sell their services. Prior to the internet being introduced into society, it was difficult for small businesses to establish themselves in international marketplaces. The internet changed this by making it cheaper and more time effective for small businesses to operate in an international marketplace. In addition, electronic and mobile commerce further transformed the shift in small businesses to an online environment.

Small businesses play an important role in the social fabric of society. They do this by providing services that are sometimes neglected by large businesses. Small businesses tend to have an independent nature and do not have to report to others. This is not always the case though with many small businesses operating under a franchise model or belonging to a national federation or association of small business owners. Having independence enables a small business to make their own decisions without interference. This enables them to quickly change market direction and to reap the rewards of their efforts (Ansell and Boin, 2019). However, it also brings challenges as small businesses take their own risks and do not have the financial support of large companies if they make a wrong decision.

Small firms tend to infrequently utilize research and development processes for product innovation. This is due to their small nature and inability to pay for such processes. However, small firms can test concepts quickly to assess the viability of products. This means they can utilize market testing methodologies in order to refine ideas. This leads to better innovations that are then assessed through market analysis. Small businesses have a try-and-see approach when understanding whether an idea will work in the market. Due to small businesses having a limited geographic market, they tend to have more local consumers. This means they are connected to a community in a way large businesses are not able to do. Small businesses can utilize their community linkages to build better business initiatives.

Small businesses have a financial fragility that means they do not have enough money to survive during the lockdown periods (Cankurtaran and Beverland, 2020). As the monthly expenses of small businesses assume a repeat and constant supply of customers, the lockdown substantially changes this assumption. Thus, it is impossible for small businesses to come out of the COVID-19 crisis unchanged (Chesbrough, 2020). The enormous change in terms of economic and psychological stress is likely to be felt for a long time period. This means that the pace at which the COVID-19 pandemic occurred has been distressing for all businesses, but especially more for small business. The toll of the crisis on small business is hard to estimate due to the ferocity of the COVID-19 crisis and its quick spreading nature representing an unprecedented event.

Entrepreneurship and small business

The word ‘entrepreneur’ can be analyzed in terms of its historical origins. Sarri and Trihopoulou (2005:26) states that ‘the Latin roots of the word are entre meaning “enter,” per meaning “before” and neur meaning “nerve center”.’ This means that an entrepreneur is classified as someone who disrupts current market conditions. This disruption occurs in the form of business activities that are new in nature. Entrepreneurship can be referred to as ‘a person’s commitment to capital accumulation and to business growth’ (Scase, 2012:14).

This definition means that there is a deliberate goal to build wealth which differs from a proprietorship that refers more to ownership. The concept of entrepreneurship is ambiguous and has been considered from various perspectives. The phenomenon of entrepreneurship refers to beneficial change that has an economic impact (Doern, Williams and Vorley, 2019). Thus, entrepreneurship can be understood in a wide and narrow sense. In the wide sense, entrepreneurship refers to anything that is innovative and risk-taking. This means it is a general understanding of behavior that is considered futuristic and not normal. In the more narrow sense, entrepreneurship refers to a mindset that can be characterized by specific forms of behavior. This means the way entrepreneurship is measured and defined is different to ordinary types of activity. Entrepreneurship plays an important function in society by enabling new business ideas to take shape.

An entrepreneur differs to a proprietor by investing in pursuing opportunities that do not have a certain outcome. Proprietorship is defined as ‘the ownership of property and other assets such that, although these can but not necessarily, be used for trading purposes and therefore to realise profits, are not utilised for the purpose of longer term processes of capital accumulation’ (Scase, 2012:14). Entrepreneurs hope that the opportunities they pursue are manifested into productive outcomes, but sometimes their efforts are not necessarily rewarded. This means that there is a degree of risk inherent within any form of entrepreneurial activity. The difference between proprietors and entrepreneurs is that proprietors consume surpluses instead of reinvesting them like entrepreneurs do (Sarri and Trihopoulou, 2005). Increasingly there is an emphasis by small business proprietors to act entrepreneurially in order to insert in future trends. This enables their business to survive and to take advantage of technological change.

Entrepreneurship is a unique field of research, but the concept remains difficult to study. This is due to entrepreneurship being an elusive topic and philosophical debates existing about its definition. The nature of entrepreneurship in small business has dominated the scholarly conversation. In order to understand the role entrepreneurship plays in small businesses, it is useful to analyze the impact of organizational culture. The way things are done in a small business can be referred to as its culture. More specifically, an organizational culture can be defined as ‘the deeply seated (often subconscious) values and beliefs shared by personnel in an organisation’ (Martins and Terblanche, 2003:65). Entrepreneurship is part of an organization’s culture and is manifested in behavior. This means an organization with a high level of entrepreneurship in its culture will likely engage in more risk-taking activities. The attitudes of individuals in the organization will be more risk-taking and want to engage in futuristic thinking. An organization’s culture is integral to the effective functioning of an organization and ensures everyone is on the same track. By having shared values, it enables individuals to coordinate different activities. This helps to promote a sense of identity for individuals working in the organization.

Organizations use different processes to guide entrepreneurial behavior (Marques, Santos, Ratten and Barros, 2019). This means managerial tools that encourage entrepreneurial change play a key role in influencing behavior. Organizations can express an entrepreneurial attitude through their physical settings and artifacts (Jones, Jones, Williams-Burnett and Ratten, 2017). This includes the use of open plan offices that facilitate the exchange of ideas. Moreover, the meaning behind language utilized in an organization can have an entrepreneurial feel. This enables the communication and interpersonal relationships to emphasize innovation.

The expressive practice of culture is embedded in processes including the goals and strategic direction of an organization. This enables an ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Contents
• List of figures
• List of tables
• List of contributors
• Acknowledgments
• 1 COVID-19, entrepreneurship, and small business
• 2 Open innovation ecosystems during the COVID-19 pandemic
• 3 Small business risk and entrepreneurship during the COVID-19 pandemic
• 4 Impact of COVID-19 on MSMEs in India: the Black Swan event that might change the trajectory of India’s economic growth
• 5 Digital transformation from COVID-19 in small business and sport entities
• 6 The impact of the experiences on affects during the COVID-19 pandemic quarantine
• 7 The perception of middle managers on the organizational environment for the promotion of entrepreneurship and innovation activities in organizations
• 8 Building and maintaining customer relationship via digital marketing and new technologies for small businesses during the COVID-19 pandemic
• 9 The future of small business entrepreneurship based on COVID-19 change
• Index