MSE Response during Times of Crisis: The Roles of Budgeting Micro Functions and Guanxi

Abstract

This study explores how micro and small enterprises (MSEs) rely on and adapt their budgetary practices to guide their activities during times of crisis, specifically during the COVID-19 global pandemic that began in early 2020. While the existing literature has mainly focused on large enterprises during economic crises, this paper will specifically consider MSEs in Southeast China during and since the pandemic. The primary data were collected via an online survey distributed in Wenzhou municipality, with 397 responses included in the analysis. The results indicate that within the budgeting process, the micro functions of planning and performance evaluation had less importance during the pandemic while the importance placed on the function of resource allocation was unchanged. The findings suggest that MSEs during crises placed less importance on the budgeting process and more on guanxi-related considerations for maintaining financial liquidity, including customer and government relationship building. Our findings add a resource-based view of the capability of guanxi during times of crisis. In addition, the limitations and future research are discussed.