Startups’ organizational resilience in post-COVID times

Startup companies are an important link in the development of innovation and entrepreneurship in the global economy. They are also an important element of the process of creating permanent competitive advantage of individual economies which is based on know-how and new technology [Baluku et al., 2016]. Thus, more and more often the authors point out that startups are the core of innovation and provide space in the economic and social sphere for creating new and future-oriented products and services [Ghezzi and Cavallo, 2020]. It should be noted that due to the startups’ innovativeness, these companies are exposed to high risk and variable growth rates. Therefore, when compared to other companies, startups are more susceptible to high uncertainty and turbulence of the environment. In this respect, it should be borne in mind that the variability of external market conditions faced by young companies makes their so-called organizational resilience increasingly important [Barasa et al., 2018]. At the same time, more and more attention is being paid to the extreme manifestations of turbulence in the environment, which result from various types of crises, especially of a non-economic nature. These crises bring about not only a structural change in the organization or a change in the business strategy, but can often lead to bankruptcy and closure of enterprises [Kantur and Iseri-Say, 2012]. In the 21st century, such a crisis is undoubtedly caused by the COVID-19 pandemic which is going to lead to an unprecedented supply-demand shock not only to the people but also to the global economy. Individual crisis researchers claim that COVID-19 can be seen from the perspective of the black swan theory [Hardy and Logan, 2020] because the coronavirus pandemic is an extremely unlikely and unexpected event with great destructive power [Elliott et al., 2020]. Moreover, there is no doubt that the pandemic has radically changed the functioning of businesses. Therefore, COVID-19 affects not only individual businesses but also all those operating in the modern market. One of the groups most vulnerable to the effects of the crisis COVID-19 is startups [Kuckertz et al., 2020]. As their operation involves testing and introducing new solutions to the market, startups are high-risk companies. This fact forces startups to constantly introduce adaptive changes that will not only enable them to grow but also help them to survive the crisis during the time of coronavirus [Salamzadeh and Dana, 2020]. Thus, modern startups must actively respond to the change in the face of increased risk and uncertainty, before the effects accompanying COVID-19 prevent them from functioning and consequently lead to their collapse. This situation requires startups to develop organizational resilience, reflected in their ability to deal with negative events and situations that are taking place on the global market.

The article, based on a critical literature review, fills a gap in the research of the organizational resilience of startups. We can notice some empirical results researches in foreign literature Dragan et al., 2022; Kurian and Joseph, 2023; Sreenivasan et al., 2023, but not related to the Polish startups. Therefore, based on the definitional analysis of organizational resilience, it is reasonable to propose the original author’s method of researching the organizational resilience of startups. This objective underpins the research hypothesis, which has been defined as follows: the startups experience reduced effects of the COVID-19 pandemic due to their organizational resilience. In order to verify the hypothesis, the first part of the study presents the most important issues related to the essence of organizational resilience on the grounds of the literature review and criticism. Theoretical considerations form the basis for presenting selected research findings concerning the startups’ organizational resilience to the coronavirus pandemic. The summary discusses the main conclusions and directions of further scientific research.

The essence of the resilience concept derives from the psychological sciences. The first studies on resilience are dated to the 1970s. They dealt with the impact of traumatic events on the functioning and development of individuals [Walsh, 2016]. Those studies were the starting point for initiating in-depth analyses of the resilience of individuals. Following the research of Rutter [2012], Garmezy [1996], and Werner [2000], the theory of resilience was created that connoted the good adaptation of individuals to ongoing changes accompanied by existing and perceptible risks. In that approach, resilience was defined as the process of an individual’s adaptation and positive functioning despite exposure to difficult and even traumatic experiences in the past. According to the researchers, the process was a multidimensional construct composed of individual factors associated with the risk and protection of an individual against the negative effects of particular events. Psychological research undoubtedly devised grounds for transferring the concept of resilience to the management sciences. In the literature, resilience is explored in the context of crisis management, adaptation to changes, or the organization’s entrepreneurial orientation to take advantage of adverse conditions in the process of developing new and creative solutions [Weick et al., 1999; Kantur and Say, 2015]. In addition, the concept of resilience has quite often been referred to the awareness and actions of business managers who should, in a social and environmental system, create conditions for the company to withstand market and environmental turbulence without losing the company’s ability to operate and provide its services [Coutu, 2002]. In such an approach, an essential managerial task is to maintain a lasting organizational capacity to minimize losses in the event of extraordinary threats [Walker et al., 2006]. Moreover, in the management sciences, the term resilience refers to actions aimed at ensuring the company’s operations at the pre-crisis level. In this regard, it is important to assess the risk of negative changes to prevent risk by implementing preventive strategies in order to anticipate and counteract specific risks [Lengnick-Hall et al., 2011]. What should be noted is that the concept of organizational resilience, defined in many ways, is often discussed in scientific literature. Some researchers believe that organizational resilience means the ability of an organization to deal with negative situations [Bauernhansl and Mandel, Diermann, 2012; Chand and Loosemore, 2016], while others believe that organizational resilience is the ability of an organization to deal with negative situations, while others see it as the ability of a company to dynamically re-compile its business model and strategy for changes in the environment [Demmer et al., 2011]. Some researchers, on the other hand, equate organizational resilience with management measures that are forced by unpredictable threats [Chand and Loosemore, 2016]. Marwa defines organizational resilience as the organization’s ability to balance its entrepreneurial opportunities and the risks occurring in the process of adapting the company to changing environmental conditions [Marwa and Milner, 2013]. It should be borne in mind that the literature points out the distinction between organizational resilience and adaptability. Thus, organizational resilience means that it does not permanently adapt to the changing conditions despite deviations in the organization’s operations. As far as adaptability is concerned, shock impacts lead to a permanent change in structure, processes, and functions in the organization [Marwa and Milner, 2013].

Another interesting definition has been proposed by Robert. He analyzes organizational resilience as the ability of a company to maintain or restore an appropriate level of functioning despite the existing threats [Robert, 2010]. Moreover, Lengnick-Hall et al. [2011] define organizational resilience using three dimensions: cognitive, behavioral, and contextual. Regarding the first dimension, they emphasize the use of employees’ creativity, experience, knowledge, (including classified knowledge), and information in the process of overcoming threats in the organization. What is important in the behavioral construct is the attitude and willingness of employees and managers to learn as well as their inclination to use solutions previously considered as nonstandard is important. In the contextual construct, the relationship between internal and external stakeholders is relevant. In this respect, good relations not only foster effective cooperation but also allow for quick decision-making and rapid action in conditions of uncertainty and threat [Lengnick-Hall et al., 2011]. Another approach to organizational resilience is presented by Annarelli and Nonino [2016] who define organizational resilience as the organization’s capacity to cope with unexpected events thanks to strategic planning and preparation of preventive measures aimed at minimizing the probability of risks [Annarelli and Nonino, 2016]. Välikangas and Romme [2012], on the other hand, define two types of resilience: operational and strategic resilience [Välikangas and Romme, 2012]. In the former type, they point out the essence of the new activities of managers and employees to achieve their ambitious organizational goals. In the latter, it is important for the organization to skillfully transform risks into new opportunities for the company. In the context of the considerations, it is also worth noting that there is a definition of organizational resilience that is based on two theoretical resilience constructs, that is, the organization’s weaknesses and its capacity to overcome the negative events that have occurred [Liu et al., 2017]. The former construct refers to factors determining the company’s vulnerability to negative changes. The key determinants include the company’s owners, managers, and employees, its material resources including equipment, machinery, buildings, financial capital, and relations with its suppliers and customers. The latter construct refers to the company’s adaptability which allows it to make accurate and favorable decisions both in day-to-day operations in normal conditions as well as during a crisis. Among the important components, one can distinguish, among others, efficient human resources management, timely decision-making, efficient information and knowledge management as well as a lasting ability to create innovations and implement creative solutions [McManus et al., 2008]. Considering the above constructs, the literature distinguishes three basic characteristics of organizational resilience (Figure 1).

Figure 1.

The above characteristics determine the organizational resilience indicators that modern science employs to measure this resilience. In reference to the first characteristic, that is, internal stakeholders’ awareness, the following components are verified:

transparent distribution of roles and responsibilities within the organization,

For another feature, that is, skillful management of internal components of the organization, the following elements can be distinguished:

risk management,

The ability to adapt to the changing reality is conditioned by the following determinants:

decentralization of structures and teams existing within the organization,

The above components are particularly important in organizations that are most exposed to environmental turbulence. Undoubtedly, startups are such organizations because, due to their relatively short presence in the market and the new solutions they offer, they are sensitive to external threats [Kuckertz et al., 2020]. In this respect, it should be remembered that there are many definitions of startups in the literature. One of the most popular has been formulated by Blank [2013]. The researcher states that a startup is a temporary organization that is looking for a repeatable and scalable business model. According to Blank, startups can be identified through: (1) farfetched goals; (2) continuous testing of the business model; and (3) external financing. Another popular definition is that by Ries [2011] who says that a startup is an organization set up to create a new product or service under conditions of extreme uncertainty [Reis, 2011]. A similar definition is proposed by Fairlie and Robb [2009] who define a Startup as an organization that creates innovation, without specifying the so-called uncertainty and risk conditions [Fairlie and Robb, 2009]. McClure, on the other hand, recognizes a startup as any company that is not completely certain who its customer is, what its product is, and how to make money from its business [McClure, 2011]. Another definition that is also worth quoting is that by Mahout who points to the so-called hyper scalability as a necessary and distinguishing feature of a startup. The hyper scalability means that the rapid growth in saleṡ does not entail the need to expand human resources in a startup [Skala, 2019].

To sum up the above, it should be stated that organizational resilience is particularly important for startups in times of modern crises. The coronavirus pandemic has brought about unimaginable process changes in the functioning of startups and continues to generate new threats to their operations [Wintson, 2020]. Thus, it seems useful to present pioneer research in the field of organizational resilience analysis of Polish startups in the era of COVID-19 as well as to examine whether this resilience has reduced the negative impact of the pandemic on the functioning of companies. In order to achieve the above goal, in this paper the author uses Stephenson’s definition of organizational resilience which it is understood as the awareness of the organization of its market environment, accompanied by its crisis management skills and its capacity to adapt. A startup was defined following Blank [2013] and Reis [2011] as a young organization that innovates in conditions of extreme uncertainty and does not have a stable and regular source of income.

Given the limitations and opportunities to conduct research due to the pandemic, a decision was made to employ the CAWI method in the study. In the survey (October 2021–March 2022), the author’s unique online questionnaire was used, which consisted of 18 core questions, a certificate of origin and diagnostic questions. At this point, it should be noted that due to the lack of data concerning startups operating on the market in any available public registers, the diagnostic questions played an important role in determining the nature of the surveyed companies. These questions were created based on the adopted definition of a startup that is given in the theoretical part of this paper. The base of the surveyed companies was those entered in the Regon register and operating in the Zachodniopomorskie, Wielkopolskie, and Lubuskie voivodeships. The questionnaire was sent to 379 companies. Out of them, 67 entities were diagnosed as startups, from which 62 correctly completed research questionnaires were obtained.

Based on the conducted research, it was possible to diagnose the characteristics of the examined companies. It was found that an average startup was operating in the IT sector, had been operating in the regional market for a minimum of 12 months, created innovative product and process solutions, and employed up to three people. The average owner was male, between 31 years old and 40 years old, with a technical education. Monthly startup revenues before the COVID-19 pandemic amounted to about 28,000 PLN.

In order to accomplish the objective of the study, the startup owners were initially asked to determine the impact of the COVID-19 pandemic on their businesses. It seems interesting that every third startup examined (34%) claimed that the COVID-19 pandemic did not affect its functioning. Nearly half of the surveyed entities (46%) answered that they noticed a positive impact, while 20% answered they had a negative impact on their operations. What is also interesting, the vast majority of the surveyed startups (73%) stated that the pandemic had not caused any change in their business model. Only one in four of the surveyed companies reported that COVID-19 had made them modify their business model. In this respect, startups that altered their business model which emphasized that the change was due to an emerging opportunity to grow under a different business model (67%) or to switch to a different sales channel and form of contacting customers (62%). It is important to note that only in the case of 16% of the surveyed companies the change of the model was caused by a drop in revenue and loss of customers. The above findings undoubtedly confirm that the entities have demonstrated organizational resilience. In order to diagnose this tendency, the respondents were asked to express their opinion (on the five-level Likert scale, where one meant strongly disagreeing and five strongly agreeing) on the use of particular elements of organizational resilience by the surveyed entities during the pandemic (Table 1).

Given the individual data, it can be clearly seen that the determinant factors of organizational resilience that was most frequently indicated by entrepreneurs were the efficient change implementation and management (mean score 4.8; Me = 4), and the efficient acquisition of new customers (mean score 4.1; Me = 4). Next, the respondents chose the efficient implementation of process innovations (mean score 3.8; Me = 3) and the efficient anticipation of failures (mean score 3.7; Me = 3). The fewest responses concerned the efficient use of market information (mean score 2.2; Me = 2) and the efficient anticipation of market failures (mean score 2.4; Me = 2). The respondents found that the efficient acquisition of funds was (external funding) the least relevant factor determining organizational resilience. The strength of this variable was considered to be moderate. This result may confirm the trend that has been present in the Polish startup market for years due to the fact that startups are predominantly financed from the owners’ own sources (most often these are their own money). As a consequence, also in the time of the pandemic the Polish startups did not use external financial sources. In this regard, the study revealed that during the pandemic, the vast majority of startups (94%) benefited from government assistance, the so-called anti-crisis shield for companies. However, the most common forms of support were exemptions from social security contributions (83%) and the reduction of working time (51%). Liquidity loans (13%) or bank credits (7%) were rarely used. Insufficient use of external financing by startups may be caused by their short operation on the market, which is why there is no reliable data for assessing their financial standing. Another reason may also be their lack of sufficient collateral for a loan or credit.

Interesting results in terms of organizational resilience are provided by the analysis of startup owners’ responses distinguished from the total surveyed population according to a company’s lifetime. Companies operating on the market for up to 6 months most often pointed to efficiency in implementing innovations (mean score 4.4; Me = 3) and in acquiring new customers (mean score 3.8; Me = 3). The startups operating for between 6 months and less than 12 months chose the ability to efficiently introduce and manage change (mean score 4.9; Me = 4) and the efficient acquisition of new resources such as financial or human resources (mean score 4.1; Me = 4). On the other hand, the majority of companies operating longer than 12 months indicated the efficiency in building customer loyalty (mean score 4.5; Me = 3) and in anticipating market trends (mean score 4.2; Me = 4).

Another important element of the study was diagnosing the impact of the startups’ organizational resilience on the dynamics of their monthly turnover between October 2021 and March 2022. In order to properly illustrate the trends, a stochastic analysis was performed using Cramer’s V test (Table 2).

Based on the above data, it is clear that all organizational resilience elements had an impact on shaping the dynamics of startups’ turnovers, as the probability value was lower than 0.05 (p < 0.05). However, when evaluating the impact of particular variables, one can notice that the following elements had the strongest impact on turnover growth: efficient acquisition of new customers (V = 0.733622) and efficient implementation of process innovations (V = 0.636921). The efficiency in introducing and managing change had a rather moderate impact (V = 0.472823). The remaining relationships under study had a weak impact as their Cramer’s V was less than 0.2.

In light of the above results, it should be stated with certainty that during the COVID-19 pandemic, the surveyed companies demonstrated strong organizational resilience. Most of them do not see the negative impact of the epidemic on their businesses, and almost half of them claim that this impact is positive or very positive. Thanks to flexible adaptation to the ongoing changes in the market, Polish startups have been able to quickly adjust their offer to the current needs of their customers on the one hand, while on the other hand, they have been able to modify processes taking place inside the company. As a result, startups not only managed to retain their headcount, but also to hire new employees, implement process innovations, and increase their revenues. As regards the latter aspect, it has been found that if a startup has already been earning money, then now, in a pandemic crisis, its revenue is usually higher than before the COVID-19 crisis a year ago. Of course, it should be borne in mind that the results they accomplish are mostly conditioned by the industry in which they operate, as 78% of the surveyed startups were involved in creating IT products or services, while 22% were creating physical products. However, the industry itself will not guarantee the startup’s income and consequently its profit unless the owners take strong action to take advantage of business opportunities that have emerged in the time of crisis. Thus, it is worth noting that although the COVID-19 crisis has had many adverse effects, the startups that show organizational resilience are able to take advantage of even the smallest opportunities to create the process innovation so much needed by customers. Therefore, the crisis is an opportunity for innovative startups to improve their business management process by adopting measures aimed at enhancing customer and social satisfaction. The implementation of these measures directly translates into an increase in the young company’s turnover, which consequently leads to an increase in its competitiveness.

In conclusion, it is justified to say that the hypothesis set at the beginning of this study has been positively verified. Hence, it must be clearly stated that organizational resilience minimizes the negative effects of the COVID-19 crisis.

The research problems concerning organizational resilience are extensive, but also difficult to investigate. This research was based on the subjective opinions of companies. This approach is fully acceptable, but not without limitations. They can be limited by including in the evaluation of organizational resilience such objective data as financial indicators and metrics that will prove the need for startups to apply the presented concept. The above limitation will surely be an incentive for further research in this area.

Theoretical and empirical considerations contained in the paper may be a valuable source of information for the theory of management sciences regarding the impact of organizational resilience on the performance of startups in times of crisis and may be a motivation for practitioners to effectively use organizational resilience in the process of building competitiveness of Polish startups. The research was itself of a pioneering nature. Its value lies in the identification of organizational resilience determinants, which condition the effective running of startups in the turbulent and changing environment of a pandemic economy.

The presented results may become a valuable contribution to future broader research, including policy strategies. Moreover, this study may also be a good starting point for research into the use of organizational resilience in creating and exploiting market opportunities by startups. Since the limitation of this research directions for future work include the exploitation and investigation of the suitability multi-criteria. In further work on the research topic undertaken, it is also planned to use methods such as Principal Component Analysis (PCA) and K-Means Clustering to create clusters representing groups of startup categories.