Dynamic capabilities and employment during COVID-19: The moderating effect of government support

Although small and medium-sized enterprises (SMEs) were particularly hard hit by the coronavirus disease 2019 (COVID-19) pandemic, some performed relatively well, maintaining or increasing employment growth. We study these differences in performance through the lens of dynamic capabilities (DCs) the...

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Bibliographic Details
Published in:International small business journal 2024-03, Vol.42 (2), p.157-184
Main Authors: Matikonis, Karolis, Graham, Byron
Format: Article
Language:English
Subjects:
Business growth
COVID-19
Employment
Financial performance
Government
Government aid
Pandemics
Public policy
Small & medium sized enterprises-SME
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Summary:Although small and medium-sized enterprises (SMEs) were particularly hard hit by the coronavirus disease 2019 (COVID-19) pandemic, some performed relatively well, maintaining or increasing employment growth. We study these differences in performance through the lens of dynamic capabilities (DCs) theory, which we extend by incorporating the moderating effect of government support during COVID-19. We analyse responses from 1421 UK SMEs and find that government support and DCs positively impact employment. We also show that government support moderates the link between DCs and employment with a negative effect after the first COVID-19 lockdown. The findings highlight the role of government policy intervention in discouraging SMEs from effectively exercising DCs during a crisis and the general importance of DCs and government support in enabling SMEs to cope with shocks.
ISSN:0266-2426
1741-2870
DOI:10.1177/02662426231173352