SME response to major exogenous shocks: The bright and dark sides of business model pivoting

Abstract

Within this short commentary, we explore the notion of pivoting; following major exogenous shocks, firms often contemplate business model pivoting where they change product or service offerings to capitalise on emerging opportunities. We assess the potential bright and dark sides of pivoting for new and existing firms in regard to quality of opportunities, fit with current capabilities and potential costs. The extant literature suggests that two forms of opportunities exist, arbitrage and innovation. We discern that post-shock, new firms may be better positioned to pursue arbitrage opportunities, whereas existing firms should target innovation. Existing firms may have more complications when pursuing arbitrage due to resource embeddedness and stakeholder obligations, and have a greater ability to innovate with an established resource base. Conversely, new firms can capitalise on arbitrage due to lack of embeddedness, as arbitrage requires a significant investment in opportunity selection. In addition, we offer suggestions for future research in regard to the current pandemic and more broadly, exogenous shocks.