Adaptive Behavior of Small Business Owners in The Context of The COVID-19 Pandemic

Abstract

Small business survived hard times during 2020–2022. The COVID-19 pandemic resulted in temporary decrease in consumer demand, revenue losses, and bankruptcies. The number of small companies in Russia has dropped dramatically as well as the number of workers engaged in small enterprises. This research aims to reveal major difficulties and institutional barriers small business owners faced during the COVID-19 pandemic. The focus of the research is on patterns of economic behavior Russian entrepreneurs demonstrated adjusting their business processes to the new economic environment. This work is a qualitative research initiative based on a series of in-depth semi-structured interviews with small business owners from the Rostov region, Russia. Interviewing and the following discourses analysis allowed us to understand the meaning and reasoning of small business owners’ behavior. The theoretical framework of the research includes the concepts of institutional economics and the insights from behavioral economics. This “mixed” approach provided us with more opportunities for describing various patterns of economic behavior in the context of fundamental uncertainty. As the pace of institutional change associated with the spread of the virus was very rapid, there was no time for companies to adapt to the new rules. Business owners often resisted changes. The high level of uncertainty became the reason for expectant behavior among small business owners based on the ‘status-quo’ strategy. Even the announcement of high fines did not stop business owners from violating the laws. Explicit opportunism went hand in hand with formal obedience. Despite this, according to official statistics, Russian small business demonstrated high resistance to various economic and social challenges during the pandemic period.