The impact of global economic crisis on SMEs

Abstract

Purpose The purpose of this paper is to examine the role of the entrepreneurial orientation (EO) in global economic crisis and whether it can mitigate the negative effects of economic crisis both on firm's operations and on firm's financial performance. Design/methodology/approach A quantitative approach is used to test the hypotheses. Principal component analysis and multiple regression analysis are used on the empirical survey data. Findings Results based on a sample of almost 200 Finnish small and medium‐sized enterprises indicated that the different dimensions of the EO can have diverging effects on how firms are impacted by the recession. In general, the more innovative and proactive the firm is, the less its operations are affected by the recession and the more risk‐taking the firm is, the more its profitability is affected by recession. Research limitations/implications A longitudinal design – rather than the current cross‐sectional design – would give a better premiss to explore the causal relationships among the research variables. Originality/value The paper is one of the first works linking EO with the effects of recession at the firm's operational level and the paper expands prior knowledge by taking the EO‐performance relationship into the context of recession.

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