Empirical Evidence On How Family Owned Businesses Deal With COVID-19 Novel Coronavirus
In a recent research article from the International Journal of Entrepreneurial Behavior & Research, researchers investigated the effects of the COVID-19 crisis on family firms to provide some interesting insights which shows that the pandemic represents a unique challenge for companies impacted by the crisis. The study shows how companies in all industries and varying sizes have adapted their business models relatively quickly and efficiently with subtle, yet unintended cultural changes which include, but are not limited to, stronger cohesion and solidarity amongst the ranks and a more aggressive move towards digitization.
Back in March of this year the World Health Organization (WHO) announced that the pandemic of COVID-19 was highly transmissible and signaled that the virus would reach global proportions. This, of course, came to fruition as the world reacted to the alarming global health crisis. In response, nations around the world began to enact protocols which included, social distancing, lock-downs, closures of public facilities including schools and universities, public venues for sporting events, concerts and other entertainment, theaters, restaurants and more. Essentially, every entity deemed, “non-essential,” faced temporary closures amidst a thoughtful attempt to quell the transmission of the virus. This, of course, came at no small expense to family owned businesses and have had significant consequences to the global economy, considering that family owned businesses make up the vast majority of businesses globally, estimated at about 99% of all businesses world-wide.
Of note, the strategy to quarantine was initially instituted in an attempt to curtail the influx of expected patients in the healthcare system, giving healthcare institutions and healthcare professionals time to “ramp-up” in response to the growing pandemic and to help them to mitigate issues involving “bed-space” which was expected to be in high demand but in very short supply. This strategy, while effective for the healthcare industries, had egregious effects on other industries as a whole as demand for goods and services increased along with supply-side issues preventing businesses from meeting the growing demands. Strict quarantine measures ultimately lead to disruption of businesses and many lost their jobs or faced temporary hiatus (22 million Americans lost their jobs in one month alone). This further exacerbated the issue of supply-chain management as many of the employees responsible for providing the goods, services, and delivery of necessary items used by companies found themselves “locked-in” their homes and unable to keep the wheels of American capitalism turning at full efficiency.
To add to the crisis, here in the United States, the pandemic became weaponized by partisan attempts to push political agendas past lawmakers who sought to provide short-term relief to businesses. In what might be considered by some to be a national fiasco, the companies that benefitted from the short-term relief were largely bigger, publicly held corporations whose balance sheets were comparatively healthier than the average small business, and many small to mid-sized companies were forced to lay-off employees and eventually close their doors permanently. This, of course, proved to be a double-edged sword, in that it not only effected the businesses but also the private citizens who own the businesses. While it could reasonably be argued that the larger corporations sustain our economy by employing people who consequently use their buying power to further economic prosperity it would be short-sighted to insist that these larger companies have a more practical need for the lion share of relief. While this issue is not fleshed out in the research it is helpful to understand the contributing factors which have impeded economic recovery in our own country.
One of the many interesting facets of the study dialed in on the peculiarity of family owned business regarding their behaviors and adaptation to the global pandemic. Statistically speaking, it turns out that increased family ownership often lead to a more slack approach to applying and enforcing formal crisis procedures during the shifting tone of governmental influence, media-driven, widespread panic, and uncertainty in the markets. All of these factors combined resulted in family firms being forced to sacrifice short-term performance for long-term survival, impacting shareholder value. Still, small to mid-sized, and even larger family-owned businesses were shown to be better suited to care for the welfare of their employees than their counterparts in the public sphere.
While this study was aimed at samples from European countries, there is much that can be gleaned from the research, hailed as the first empirical study addressing the small business in light of the pandemic, highlighting the effective way in which family owned businesses adapt and respond to crisis situations such as the COVID-19 pandemic. Of interest, the paper also shows how businesses respond to “lock-down” situations and how resilient family owned businesses are to innovate during times of conflict.
The research certainly pulls its weight in helping us to realize ways in which we can improve our businesses in light of global incidents. Furthermore, it serves as both an indictment for businesses who rely on monarchical management to the detriment of clear, precise, and strategic planning, and as an accolade for those who adapt to the change, adopt formal strategies against formidable challenges, and persevere through tough times. This research might be of particular interest to those in the fields of strategic management and crisis management and can be reviewed in its full context here.
1. ResearchGate.net: The economics of COVID-19: Initial empirical evidence on how family firms in five European countries cope with the corona crisis