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

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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.

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Understanding sources of sustained competitive advantage has become a major area of research in strategic management. Building on the assumptions that strategic resources are heterogeneously distributed acrossfirms and that these differences are stable over time, this article examines the link betweenfirm resources and sustained competitive advantage. Four empirical indicators of the potential of firm resources to generate sustained competitive advantage-value, rareness, imitability, and substitutability-are discussed. The model is applied by analyzing the potential of severalfirm resourcesfor generating sustained competitive advantages. The article concludes by examining implications of this firm resource model of sustained competitive advantage for other business disciplines.

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This book contains the most sustained and serious attack on mainstream, neoclassical economics in more than forty years. Nelson and Winter focus their critique on the basic question of how firms and industries change overtime. They marshal significant objections to the fundamental neoclassical assumptions of profit maximization and market equilibrium, which they find ineffective in the analysis of technological innovation and the dynamics of competition among firms. To replace these assumptions, they borrow from biology the concept of natural selection to construct a precise and detailed evolutionary theory of business behavior. They grant that films are motivated by profit and engage in search for ways of improving profits, but they do not consider them to be profit maximizing. Likewise, they emphasize the tendency for the more profitable firms to drive the less profitable ones out of business, but they do not focus their analysis on hypothetical states of industry equilibrium. The results of their new paradigm and analytical framework are impressive. Not only have they been able to develop more coherent and powerful models of competitive firm dynamics under conditions of growth and technological change, but their approach is compatible with findings in psychology and other social sciences. Finally, their work has important implications for welfare economics and for government policy toward industry.