Entrepreneurs responding to the COVID-19 crisis: evidence from Ireland

The World Health Organisation (WHO) declared COVID-19 a pandemic on March 11th, 2020 (Liguori and Winkler 2020). As a result, social activity changed and there was a significant decrease in economic activity (Ratten 2020). Authors including (Alonso et al., 2020; Cowling et al., 2020; Foss, 2020; and Liguori and Pittz, 2020) reflect that all crises, whatever their origin, have an immediate and severe impact on entrepreneurs. Therefore, the aim of this paper is to capture the experiences of entrepreneurs who endured closures and operational restrictions. We do this to understand the challenges they face in continuing their entrepreneurial journey.

Although the COVID-19 crisis is a relatively recent occurrence, there is an emergent literature on the topic (Alonso et al., 2020; Bartik, et al., 2020; Cowling, et al., 2020; Kuckertz et al., 2020; Liguori and Pittz, 2020; Nummela et al., 2020; Papadopoulos, 2020; Ratten, 2020; Stephens et al., 2021b; Zinghan et al., 2021). In this paper we add to this literature by presenting evidence from Ireland. Given the economic importance of small businesses to the Irish economy, additional research is needed to understand how their owners think and act in relation to the COVID-19 crisis. The overall aim is to understand the entrepreneurs’ motivations, experiences and reflections on the process of (re)starting the entrepreneurial journey after a crisis episode. The findings from this study provide novel insights with regard to the resources and strategies used by entrepreneurs during a time of crisis.

Ratten (2020) explains that when studying the initial impacts of COVID-19 researchers need to be inventive with the design of their data collection process, which may need to take place at speed. Nummela et al. (2020) propose that researchers should adopt a narrative based approach when exploring how COVID-19 has changed the lives of entrepreneurs. In this paper we present the story of entrepreneurship from the perspective of fifteen entrepreneurs who experienced a range of challenges and adopted a range of strategies during the first six months (April – September 2000) of the COVID-19 restrictions on business activity. We begin by examining the issues associated with crisis episodes in entrepreneurship, as it relates to the emergent literature on COVID-19. Then we present evidence from the interviews with the fifteen entrepreneurs and finally, we present our conclusions, recommendations and future research directions.

The business community, specifically, entrepreneurs, have during 2020–2021 operated in a volatile business environment. They will again face significant uncertainty in 2022. Spillan and Hough (2003) warn that not only can a crisis adversely impact business owners and entrepreneurs, it can destroy the business entity and wreak havoc on suppliers, customers, partners, competitors, families and the community in which the business is based. The literature on crisis episodes and entrepreneurial activity is limited, but notable articles include: Spillan and Hough (2003), Papaoikonomou et al. (2012), Doern et al., (2019); and Brown et al. (2020). Giones et al. (2020) explain that although the COVID-19 crisis impacts all types of economic activity, public support programs tend to prioritize and protect established and/or larger organizations. Furthermore, Brown et al. (2020) report that the attention of policy makers and support agencies has centered on the immediate impacts that the COVID-19 crisis has had for existing businesses, in terms of their ability to maintain staffing levels, avoid cash-flow problems and prevent widespread bankruptcies in the wake of the lockdown.

The literature has struggled to fully comprehend how entrepreneurial activity is upended, mediated and realigned by crisis episodes, especially when they are global in nature (Doern et al., 2019; Herbane, 2010). Indeed, research on the impact of crisis events for entrepreneurs is sparse, and often narrow in focus. This is despite the fact that entrepreneurs and their businesses are often the most disadvantaged by crisis episodes (Ratten 2020). An important factor in understanding the impact that temporary, government restrictions have on small business and entrepreneurs is understanding the cost of a crisis and how it creates barriers and perceived obstacles for those who wish to continue (Hegarty et al., 2020). The financial strain, in many cases, leaves entrepreneurs with the issue of survival (Dimov, 2010; Simmons et al. 2014). This is both a formal barrier to continuation but also an informal barrier as it may result in risk aversion. Jenkins et al. (2014) caution that while business problems can provide valuable lessons this can come with a high emotional and financial cost, causing negative psychological effects for the entrepreneur. Furthermore, research suggests that entrepreneurs tend to exhibit high levels of psychological stress (Fowle 2019; Freeman et al. 2019). Significantly, according to Shepherd and Haynie (2011), the grief and negative emotions felt by entrepreneurs who experience failure can obstruct their future engagement with business and entrepreneurial activity.

In contrast, Hayward et al. (2010) and Corner et al. (2017) report that despite the trauma that comes with business problems, entrepreneurs often exhibit resilience. Resilience can be defined as the process of coping with stressors and change, enabling individuals to bounce back after experiencing a failure (Richardson 2002; Hayward et al. 2010; Bullough and Renko, 2013). Jenkins et al. (2014) suggest that entrepreneurs develop psychological capital after experiencing a crisis. Luthans and Youssef-Morgan, (2017) and Franco et al. (2020) present evidence that financial, operational and environmental factors have a significant influence over entrepreneurial resilience. In addition, entrepreneurs who display social resilience have a better ability to maintain and build upon relationships which might have been damaged due to a failed venture (Hayward et al. 2010). Resilience is important as it allows not only facilitates recovery but also learning.

There is an emergent, albeit small body of research on the short-term impacts that the restrictions imposed in response to COVID-19 have had on entrepreneurs. Our review of the literature indicates that entrepreneurs are vulnerable to periods of crisis because they lack key business resources (staff, finance, ICT based solutions etc.). There is evidence reported in the literature of the resilience of entrepreneurs and of the potential for valuable learning to emerge from crisis episodes. Our review of articles which deal specifically with entrepreneurs and the COVID-19 crisis (Bartik et al. 2020; Brown et al., 2020; Cowling et al., 2020; He and Harris, 2020; Kuckertz et al., 2020; Liguori and Pittz, 2020; Nummela et al., 2020; Papadopoulos et al., 2020; Ratten, 2020; Stephens et al., 2021a) indicates that studies on the impact of COVID-19 should examine four key themes: the psychological impact; the attitude of entrepreneurs; the changes that occur in their business activities; and the supports that are needed. Therefore, in our discussion section we present an overview of the key findings as they relate to the four themes identified in the literature.

Authors including Low and McMillian (1998) and Breslin (2008) have proposed that the challenge for future entrepreneurship research is to continue to move towards explaining rather than documenting entrepreneurial phenomenon. However, we argue that the unique circumstances that have resulted from the COVID-19 crisis requires empirical work that is exploratory (Ratten, 2020) and that adopts a narrative based approach to reporting how COVID-19 has changed the lives of entrepreneurs (Nummela et al., 2020). The novelty of our study is based on the fact that we interviewed entrepreneurs five times over a period of six months. During this period the entrepreneurs faced a range of unique challenges. The imposition of business restrictions as a result of the COVID-19 pandemic saw all non-essential businesses close, then partially reopen, in many cases with significantly different business model and operating system. Given the motives for becoming an entrepreneur are often multi-faceted semi-structured interviews are an appropriate way of capturing the complexity of the process. The interview schedule was devised after a review of the literature and was sent to participants prior to the interviews. The interviews explored the entrepreneurs experience of the crisis, motivations for continuing, current activities and the types of supports that they need.

The methodology was designed to be responsive to the changing economic situation and the level of restrictions. The interviews were conducted at five stages. Each of the five stages correspond to a different level of economic and social activity being permitted. Therefore, there was some variation in the questions used in each interview.

Stage 1: Week beginning March 16^th. A nationwide lockdown was introduced. All non-essential businesses were closed. Movement was restricted to 5km. There was limited business activity due to restricted supply-chains and a lack of online capacity.

Stage 2: Week beginning May 5^th. Some businesses had transitioned to an online model with social media-based marketing driving limited sales. The Government published its plan to reopen the economy on a phased basis.

Stage 3: Week beginning June 8^th. Phase 2 of reopening had commenced. Non-essential retail was open for click and collect. Food and beverages were available for outside dining and indoor for hotel residents.

Stage 4: Week beginning July 7^th. Phase 3 of Reopening (with some local lockdowns in place). Businesses that reopened did so with new: systems, on-site layouts and modified offerings. Businesses based on personal services i.e. hairdressers remained closed.

Stage 5: Week beginning August 25^th. the majority of businesses had (re)opened but in a restricted capacity. Schools had also reopened. There was an expectation that society and the economy would operate in the “new normal” until such time as a vaccination programme was implemented.

Brush et al. (2009) argue that exploring the entrepreneurial narrative can make a unique contribution to our understanding of the phenomenon. Indeed, Smith (2009) explains that to be made meaningful for others, experiences, values, and achievements must be communicated to others via language, narrative and storytelling. Therefore, narrative structuring (Kvale 2006; Roundy 2016) was used to create a coherent story of the entrepreneurs’ experiences. The interviews were conducted online via MS Teams or Zoom. The entrepreneurs were all based in Ireland. Each interview lasted on average 20 minutes. The total interview time was circa one hour and forty-five minutes for each entrepreneur. Although our study is novel in approach other studies have used multiple interviews over time to study micro firms and entrepreneurship (Crick, 2011; Jaskiewicz et al., 2015; Kelliher et al., 2020). The interviews were recorded, transcribed with note taking in line with recommendations from (Bryman, 2012; Saunders et al., 2015). The unit of analysis is an individual who had experienced a temporary business closure. Criterion sampling was applied. All the entrepreneurs: 1) had experienced business restrictions due to COVID-19; 2) had (re)started successfully; and 3) expected to continue in business during the remainder of 2020. Due to the sensitive nature of the topic and time constraints many potential participants declined to participate. A profile of the participants is provided in Table 1. Pseudonyms are used to ensure anonymity and to enhance the authenticity of the emergent narrative.

Eight of the entrepreneurs are male and seven are female. Their ages range from thirty up to sixty. The primary business of the entrepreneurs was in existence for between one and thirty years. Six of the entrepreneurs have completed higher education and the rest have completed second level (up to the leaving certificate or equivalent). The entrepreneurs can be classified by five business types with three from each industry. Two of the businesses did not close during the restrictions. One was deemed essential (cleaning) and the other is an online consultancy which required minimal operational adjustment. Four businesses were able to restructure and reopen after six weeks. Seven reopened after twelve weeks and two after sixteen weeks.

The findings from the interviews are presented for each of the five stages:

Table 2 presents an overview of the key findings as they relate to the four themes identified in our literature review. Table 2 provides an indication that for the entrepreneurs the appraisal of the situation was an iterative process. The evidence presented in Table 2 shows that the impacts of the restrictions can be tracked over time (the 5 stages). The impacts are varied and subject to change over time. We believe that the four themes identified in the literature are a useful lens with which to frame and organise our findings.

Table 2 illustrates that the imposition of restrictions and temporary closures impact an entrepreneur in four ways. First, the entrepreneurs experienced a significant level of psychological stress but over time they accepted the changed circumstances and focused on continuation. This supports evidence in the literature on the resilience of entrepreneurs, especially during crisis episodes (Spillan and Hough, 2003; Shepherd and Haynie, 2011; Jenkins et al., 2014; Hegarty et al., 2020; Stephens et al., 2021a). Second, initially the entrepreneurs focused on their family, staff and customers. But over time they engaged in reflection with a focus on work/life balance and/or the type of product/service that they want to provide. This is a novel insight and points to a need to explore the impact of “breaks”, both voluntary and imposed that occur during an entrepreneurial journey. Third, in response to the crisis the entrepreneurs were willing to consider any option that allowed them to continue in business. However, over time their focus was on the retention and development of their core business, to which they have an emotional attachment to (Singh, 2015; Williams and Shepherd, 2016; Hegarty et al. 2020). Our findings indicate that during the COVID-19 there were some novel reactions, caused by different business being impacted for different periods of time and in different ways depending on the core product or service. Fourth, and finally, the entrepreneurs needed different types of supports at different stages of the crisis, from closure through to re-opening. Initially, it was accurate and up-to-date information. Then practical supports to help maintain liquidity and then accurate information to allow them to engage in meaningful planning. In the medium-term entrepreneurs who have been impacted by COVID-19 will need supports for their business, and importantly for themselves. The entrepreneurs need access to their peers and business community. This is for social support, to share experiences (to alleviate the psychological impacts) and to allows them to understand how best to support their employees.

Additional staffing needs, less capacity for customers and strict cleaning procedures requiring specialist equipment were some of the financial challenges incurred by the entrepreneurs upon (re)opening. For the entrepreneurs who were able to develop online provision, this resulted in new business opportunities and revenue streams (Di Domenico et al., 2014; Daniel et al., 2015). However, the entrepreneurs experienced distress as a result of the impact that the uncertainty had on their families, their staff and their peers in their business community. (Politis and Gabrielsson, 2009; Jenkins et al., 2014; Simmons et al., 2014; Shepherd, et al., 2016; Hegarty et al., 2020).

The evidence from our interviews indicates that a temporary business closure has a significant impact on the psychological wellbeing of an entrepreneur. During this study the entrepreneurs had to deal with a great deal of stress and uncertainty. However, the entrepreneurs responded by engaging in a period of reflection resulting in new business ideas and different perspectives on their work/life balance. The need for achievement is an important trait in motivating entrepreneurs and irrespective of external shocks and the associated uncertainty entrepreneurs will still retain a desire to (re)achieve. For the entrepreneurs the decision to continue their entrepreneurial journey is framed by resilience linked to work satisfaction, loyalty to staff and customers; and a shared identity with their business community and peers. In this unique scenario dealing with the unknown was the biggest challenge. Despite the best efforts of government and health agencies the COVID-19 restrictions continue. Appropriate support systems are complex to design and deliver. The situation is fluid and so financing interventions is a significant challenge and appropriate support systems are complex to design and deliver (Brown et al., 2020; Liguori and Pittz, 2020; Papadopoulos et al., 2020; Stephens et al., 2021b).

A business closure can devastate an entrepreneur leaving them in shock and left to deal with the emotional and financial impacts (Corner et al., 2017). However, the entrepreneurs in this study used their time to evaluate and reassess their business, looking at how they could adapt and improve their processes, offerings and resource allocation. The entrepreneurs displayed resilience as they adapted rapidly and changed their business model to fit with the limitations of the business environment. Additional financial strain occurred as a result of the rigorous processes and procedures imposed on the businesses. The findings highlight the importance of providing entrepreneurs with timely information, guidance and the opportunity to share their experiences with others in the same situation. Some of the entrepreneurs felt more supported than others, some were better able to adapt. Therefore, entrepreneurs should not be thought of as a homogeneous group during crisis episodes. The evidence from our study provides a snapshot of the perceptions of entrepreneurs who faced temporary business closure due to the COVID-19 pandemic. Furthermore, the findings offer insights for policy makers who wish to aid business recovery. The length of the pandemic will inevitable determine the scale and scope of government interventions. Entrepreneurs who have been impacted by COVID-19 need supports for their business, and for themselves. We conclude by acknowledging the limitations of our study. The data collection process was subject to significant time constraints. The data was collected during a period of great change for the entrepreneurs. Their availability to participate in our study was extremely limited. Our sample size is small and a greater number of respondents and from different jurisdictions would add additional perspective. Although the transcripts are detailed and represent a biographical account a longitudinal study may provide greater insights. Additional research is needed into the long-term impacts of the business restrictions, specifically, the rates of entrepreneurial exit and the use of qualitative methods to explore the reasons and outcomes.