What are the entrepreneurial reactions in response to COVID-19?

Responsible researcher: Viviane Pires Ribeiro

Article title : WILL I BE ABLE TO FUNCTION EFFECTIVELY? PANDEMIC AND ITS EFFECT ON ENTREPRENEURIAL WELL-BEING AND POST-COVID-19 FUNCTIONING

Article authors: Gul Afshan, Amjad Ali Memon and Adnan Manzoor

Location of intervention: Countries with cases of COVID-19

Sample size: Not defined

Sector: Finance

Type of Intervention: Behavioral analysis of entrepreneurs

Variable of main interest: Entrepreneur well-being

Assessment method: Others - Theoretical model

Assessment Context

With regard to entrepreneurship, adverse events (disasters, wars, terrorist attacks, pandemics) contain a high level of uncertainty to continue and manage existing companies or start a new business, and can thus negatively affect the Gross Domestic Product (GDP) of the country. The current adverse event is the COVID-19 pandemic, which has forced many small and medium-sized companies to close their doors and consequently, millions of employees have lost their jobs. The result is that entrepreneurs are less interested in investing and more interested in saving their capital.

Recent research shows that the COVID-19 pandemic has affected individuals' physical and mental health. In this context, the post-pandemic period may result in a new way of functioning at the individual and organizational levels. Economies will begin to recover and employees who were laid off will return to their jobs, employees who worked from home will return to their workstations. But restarting business and running it may or may not be the same for all business owners.

Some entrepreneurs demonstrate resilience to deal with stress and seize the opportunity. On the other hand, many companies cannot survive and manage such a crisis in such a stressful situation. Generally, crises discourage people from taking up challenging tasks. However, despite the uncertainties and affected well-being, entrepreneurs need to strive to respond to these challenges.

Intervention Details

Using stress event theory (SET), which explains entrepreneurial reactions or behaviors in response to the characteristics of a given event, Afshan et al. (2021) seek to explain a conceptual framework that describes the effect of resource constraints induced by COVID-19 on an entrepreneur's well-being and functioning post-COVID-19. The theory of stress events also proposes the interpretation of events to choose coping strategies that differentiate the quality of business well-being, social relationships and results related to the enterprise. 

The authors established that the type of entrepreneur varies according to opportunity and need. In this sense, it is observed that literature dealing with entrepreneurship has shown that people are heterogeneous in their perception of the environment. Two main types of entrepreneurs have been discussed in the literature: the necessity entrepreneur and the opportunity entrepreneur. The motives behind necessity entrepreneurs generally lie in satisfying the need and providing an alternative to unemployment. On the other hand, when people are attracted to the establishment of an entrepreneurial company, the recognition and exploitation of environmental opportunities occurs.

Methodology Details

Afshan et al. (2021) propose a conceptual framework for the relationships between COVID-19-induced resource constraints and post-COVID-19 functioning with the underlying corporate welfare mechanism.

Following the theory of stress events, the conceptual study also proposes that opportunity entrepreneurs would be able to deal with the stressful event (pandemic), affecting their well-being, social relationships and functioning. Entrepreneurs' well-being during COVID-19 defines their post-COVID-19 functioning in the form of behavioral and emotional functioning.

The authors therefore present a theoretical model that incorporates the predictors and outcomes of corporate well-being in times of the COVID-19 pandemic to suggest future research directions. The relationships proposed in the article can be tested empirically to better understand the magnitude of such effects on post-pandemic business functioning.

Results

The analysis carried out by Afshan et al. (2021) shows that the entrepreneur's well-being has important implications for the success of the business. For example, physical and psychological well-being helps entrepreneurs to increase their focus on their business, becoming more aware of opportunities for the growth and development of the enterprise. Furthermore, physical health makes entrepreneurs more creative, happy, learning-oriented and, ultimately, more successful.

In addition to the devastating effects on business operations, the pandemic has given rise to entrepreneurial opportunities to meet the emerging needs of the public and government. Individuals who utilize opportunities can help communities achieve sustainability, socially benefit the population, and lessen threats (i.e., COVID-19) prevalent in the environment.

The study proposes necessity entrepreneurship as an essential antecedent for the entrepreneur's well-being, which differs from opportunity entrepreneurship; therefore, the origin of the entrepreneur occurs through either of the two types of entrepreneurship, followed by resource constraints induced by adverse events. This suggests that COVID-19 has had similar impacts, causing loss of property and human lives, inducing psychological stressors, and exposing the business owner himself to health threats. However, entrepreneurial type may have differentiating impacts on the effect of COVID-19 on well-being.

Public Policy Lessons

Afshan et al. (2021) contributes to the entrepreneurship, human resource management, and disaster management literature in four different ways. First, the study employs stress event theory to explain the effects of adverse events on an entrepreneur's post-COVID-19 well-being and functioning. Secondly, the authors propose that these scenarios generate two types of entrepreneurs – opportunity entrepreneurs and necessity entrepreneurs; both have different implications and purposes and different effects on creating value for the environment and the community. Third, it is essential to consider the types of entrepreneurs post-COVID-19 to define a path to economic revival. Finally, the study defines directions for future research in the context of COVID-19 and corporate well-being, followed by post-COVID-19 functioning.

Considering the two types of entrepreneurs (necessity entrepreneur and opportunity entrepreneur) and following the theory of stress events, the authors argue that the negative consequences of the pandemic may differ according to the type of entrepreneurship. The opportunity entrepreneur may see this pandemic event as an opportunity to develop something necessary for the population, while necessity-driven entrepreneurs would not see the challenge as an opportunity and would only be striving to meet basic needs.

By addressing these relationships, the study contributed to recent literature on the pandemic and its effects on corporate well-being in three main ways. First, based on stress event theory, it is expected that the entrepreneurial reaction to COVID-19-induced resource constraints may positively affect post-pandemic functioning.

Second, it is expected that entrepreneurial well-being – physical and psychological health in social relationships and financial stability – can act as an underlying mechanism to explain the relationship between COVID-19-induced resource constraints and post-operative functioning. -COVID-19.

Finally, it is expected that the type of entrepreneurship can determine the magnitude of pandemic-induced restrictions on the well-being and post-pandemic functioning of the company. Specifically, opportunity entrepreneurs are expected to be able to utilize changing demands and thus be able to respond to challenges.

Reference

AFSHAN, Gul; MEMON, Amjad Ali; MANZOOR, Adnan. Will I Be Able to Function Effectively? Pandemic and Its Effect on Entrepreneurial Well-Being and Post-COVID-19 Functioning. Pandemic and Its Effect on Entrepreneurial Well-Being and Post-COVID-19 Functioning, 2021.