Resilience in the face of crises such as the COVID-19 pandemic depends in large part on firm characteristics, notably access to external resources, and the willingness to innovate business models. Barriers to external resources lead single-unit firms and female-led firms to be less resilient in times of crisis.
The COVID-19 crisis has sparked new interest in the resilience of organizations in the face of a widespread crisis on the scale of the pandemic. A study by a team of scholars from La Rioja University in Spain and the University of Surrey in the UK identified a surprising negative factor in determining the firm characteristics that best position a company or organization for resilience: the presence of a female CEO. Based on comparisons of firm results during the pandemic to firm results before the pandemic, the research showed that sales by firms led by female CEOs decreased substantially more during the pandemic than firms led by male CEOs. Another firm characteristic that impacted the resilience of organizations during the pandemic, according to the research data, was whether the firm was a single-unit firm or multiple business units or locations. Multi-unit firms performed better than single-unit firms during the height of COVID-19.
The reason for the difficulties of single-unit firms and firms with female CEOs to deal with the crisis is tied to access to resources. When a crisis hits, companies need additional resources, internal or external, to face the new challenges and uncertainty. Access to resources is thus a key contributor to resilience. Female leaders, however, face an uphill battle when trying to access additional resources compared to their male counterparts.
One reason is the systematic discrimination they face when accessing external credit. Compounding this difficulty is a gender gap in reaping the benefits of professional networks particularly important given the role of networks in accessing external resources when internal resources are not sufficient. In addition, the post-pandemic environment from increased domestic workload to remote work (making connections to already weak networks more difficult) further undermined women managers.
Single-unit firms are also hampered by the requirement for additional resources. Multi-unit firms have greater access to more diversified internal resources, which they can then more flexibly reconfigure and redeploy as necessary to meet the challenges of a crisis. Compounding this advantage over single-unit firms is the ability of multi-unit firms to leverage knowledge and experimentation across different business units or locations.
In addition to increased access to resources, a second major factor impacting organizational resilience during a crisis is business model innovation.
The researchers looked at three manifestations of business model innovation:
The research showed that firms who initiated work-from-home policies and increased the physical delivery of online orders were more resilient. The increase in online activity did not seem to make a significant difference in firm resilience.
The researchers used two databases, both from the World Bank, to develop the data for the research. The first database was the World Bank’s Enterprise Survey (WBES), conducted prior to the pandemic. The second database was the World Bank’s COVID-19 Impact ES Follow-up Survey, conducted in 2020 and designed to understand the pandemic’s impact on firms. Building on these two databases, the study’s final sample consisted of more than 11,000 firms in 34 countries. To determine resilience, the researchers compared sales figures from the last completed month in the 2020 survey to the same month in the 2019 pre-pandemic survey.
Perhaps the study’s most important implication for managers is the importance of business model innovation as a key factor in overcoming or mitigating the challenges of a significant crisis such as COVID-19 or natural disasters. While it analyzed specific innovation steps (remote work and increased delivery of online orders), this study in combination with other studies reinforces the conclusion that innovation is the fundamental way out of a crisis. In the case of a significant number of companies, a crisis has been the impetus for innovation perhaps a wake-up call that the absence of a crisis can lead to complacency.
Jaime Gómez profile at La Rioja University
https://investigacion.unirioja.es/investigadores/312/detalle?lang=en
Sorin M.S. Krammer profile at University of Surrey
https://www.surrey.ac.uk/people/sorin-krammer
Beatriz Pérez-Aradros profile at La Rioja University
https://investigacion.unirioja.es/investigadores/391/detalle
Idana Salazar profile at La Rioja University
https://investigacion.unirioja.es/investigadores/277/detalle?lang=en
Resilience to the Pandemic: The Role of Female Management, Multi-unit Structure, and Business Model Innovation. Jaime Gómez, Sorin M.S. Krammer, Beatriz Pérez-Aradros, Idana Salazar. (December 1, 2023) Available at SSRN: https://ssrn.com/abstract=4656450 or http://dx.doi.org/10.2139/ssrn.4656450
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