Resilience and digitally-advanced entrepreneurship

ABSTRACT

As digitalization continues to reshape industries and markets, digital transformation and creation of a ‘digital safety net’ has emerged as a prominent mechanism for entrepreneurial resilience. Digitally advanced entrepreneurs harness technology and innovative business models and adopt agile strategies to grow, while digitally-uncertain entrepreneurs struggle to maintain their business models and customers. Digital transformation has been pivotal during the COVID-19 pandemic and enabled greater diversification, enhanced adaptability, improved access to global markets, and novel forms of knowledge collaboration, altogether increasing firms’ ability to survive and grow. Understanding the mechanisms and implications of the relationship between digital technologies and entrepreneurial resilience is essential for policymakers, researchers, and practitioners to develop rapid policy responses.

KEYWORDS:

• Resilience
• regional economic development
• innovation
• digital technologies
• entrepreneurship

1. Introduction

Since the seminal work of Feldman and Francis (2002) on ‘The entrepreneurial spark: Individual agents and the formation of innovative clusters’, scholarly work exploring the processes of creating new firms and fostering regional and industrial transformation has accelerated. Entrepreneurship is not only critical for the formation of such clusters – serving as a catalyst for economic growth through innovative action – but also a prerequisite for regional economic development (Audretsch, Belitski, and Desai 2015), and the stimulation of economic diversity and resilience (Hu and Hassink 2020; Pal, Torstensson, and Mattila 2014).

Digitalization has contributed to a transformative era for entrepreneurship, democratizing access to markets, resources, and tools, and enabling start-ups to reach global audiences and more competitively rival established businesses (Audretsch et al. 2023; Nambisan et al. 2017). Entrepreneurs are embracing new models of growth and acceleration which draw upon digital technologies, such as cloud computing, artificial intelligence, and blockchain technology, which help to further modify the mindset of how business can be conducted across different entrepreneurial ecosystems (Audretsch and Belitski 2021b; Elia, Margherita, and Passiante 2020) and at different stages of a firm’s growth continuum within different contexts (Audretsch et al. 2022, 2022). Recent research in entrepreneurship shows that digital technologies have changed how businesses engage with customers, compete, and diffuse knowledge (Kenney and Zysman 2020; Papadopoulos, Baltas, and Balta 2020). Audretsch et al. (2023a) reveal that the adoption of digital technologies meaningfully fosters value creation and facilitates digital entrepreneurial ecosystems, defined as ‘complex and dynamic systems composed of heterogeneous actors that exploit digital technologies for value co-creation while relying on digital infrastructure that supports governance mechanisms, facilitates access to resources, enables the development of complementarities, and overcomes spatial boundaries’ (Bejjani, Göcke, and Menter 2023, 8). As such, the adoption of digital technologies and an embeddedness within digital entrepreneurial ecosystems fosters firms’ abilities and regional capacity be or become resilient, enabling business transformations and radical change (Khurana, Dutta, and Ghura 2022). To date, resilience theory has been used to explore how individuals, organizations, regions, and countries respond and recover from exogenous shocks (e.g. crises, financial shocks, environmental jolts) (Williams and Vorley 2014). We are interested to explore resilience as a multi-level construct at the individual and organizational level such as ‘the maintenance of positive adjustment under challenging conditions such that the organization emerges from those conditions strengthened and more resourceful’ (Vogus and Sutcliffe 2007, 3418) and at a regional level as “a regional economy’s ability to recover from a shock but also to the degree of resistance to that shock in the first place (Simmie and Martin 2010, 28). In a world where change is the only constant, organizational resilience has become critically important for several compelling reasons. First, resilience enables businesses and regions to withstand a wide array of disruptions (Bhamra, Dani, and Burnard 2011; Khlystova and Kalyuzhnova 2023), including economic downturns, natural disasters, climate change impacts, and public health crises like pandemics. Building resilience is essential to mitigating the severity of exogenous hazards, minimizing their socioeconomic consequences, as well as to how rapidly firms and regions are at rebounding from such exogenous shocks when they occur (Meyer 1982). Secondly, resilient firms and regions are better equipped to retain and attract businesses, talent, and investment. Due to their participation in (global) knowledge flows, resilient regions operate at the technological frontier, better enabling them to find solutions to (global) problems more quickly, for instance, during the COVID-19 pandemic (Cantner et al. 2023). Thirdly, organizational and regional resilience fosters community cohesion and social and technological support networks, which are invaluable during times of crisis. Strong communities can mobilize resources, provide aid to those in need, and collaborate more effectively to respond to challenges.

Therefore, the primary objective of this special issue is to expand our understanding of digital transformation across individual, organizational, and regional levels by a) examining the growth potential of digitally advanced entrepreneurs and how operational and strategic alignment may take place at different levels of growth (Li et al. 2016) and b) demonstrating how the adoption of digital technologies ultimately affects firm’s and regional ability to withstand and recover from shock. In particular, this special issue deepens our understanding of two important aspects of resilience. First, it contributes to our understanding of the three emerging pillars of digital transformation and resilience, e.g. values (Ruf et al. 2021), capital and technology. Secondly, the role of entrepreneurs in transforming regions and industries to be more resilient and add value (Boschma 2015; Cunningham, Menter, and O’Kane 2018). Of note, these factors have been recognized as important for organizational and regional resilience during times of crisis (Bartik et al. 2020; Thorgren and Williams 2020). Finally, we investigate new trajectories through which economic and societal value creation may enable resilience and enable different types of entrepreneurs.

2. Theoretical framework

The growing literature on organizational resilience (Bhamra, Dani, and Burnard 2011; Czakon, Hajdas, and Radomska 2023) highlights a burgeoning interest in research related to small and medium-sized firms (Chhatwani et al. 2022) and the ways they create value and grow (Audretsch et al. 2023). This interest has been further intensified by the unique challenges posed by the COVID-19 pandemic.

The literature points to several advantages small and medium-sized firms (henceforth, ‘small firms’) might have over larger organizations, including less bureaucracy, quick decision-making, faster internal communications, and faster learning cycles (Smallbone et al. 2012). However, these relative advantages may not be universally applicable and can be contingent on factors like the firm’s leadership, organizational culture, and the nature of the crises faced. Therefore, the effects of financial crises followed by the global COVID-19 pandemic on small firms have been notably profound due to their limited assets and lack of absorptive capacity to access and assimilate new external resources (Audretsch, Belitski, and Brush 2023; Ebben and Johnson 2005). This generalized understanding warrants a more critical examination.

First, the statement that the COVID-19 pandemic has caused an unprecedented economic breakdown for small firms (Belitski et al. 2022) is overly broad and might neglect to consider variations across distinct sectors and regions. The collapse in demand and business activities may have manifest differently depending on the industry, location, and government support available to the firms across these various areas.

Second, many common concerns for small businesses around resource scarcity and limited access to funding and new technologies (Herbane 2010) requires further scrutiny. While these constraints are generally acknowledged, such a perspective could undermine the resilience and adaptability demonstrated by many small firms.

Additionally, the assertion that resilience is an organizational capability which enables small firms to recover more easily from disruptions may oversimplify a complex process. While some studies support this view, others challenge it, considering the specificities of each industry, organizational structure, or even geographical location.

Therefore, the narrative around the challenges and strengths of small firms and entrepreneurs in the face of crises such as the COVID-19 pandemic must be considered with a critical lens. A more nuanced analysis that considers the heterogeneity of small firms, the multifaceted nature of the challenges, and the contextual factors influencing their resilience is essential for a comprehensive understanding of this subject.

In the contemporary business landscape, the digital tools available to firms have become vital in building resilience across different facets of business operation (Audretsch and Belitski 2021a; Data Catalyst Institute 2021). Below is a critical evaluation of how digital tools play a potentially critical role across four key aspects of organizational resilience:

First, a proactive attribute. Digital tools allow firms to proactively accumulate resources and consciously build capabilities. These tools, ranging from data analytics to collaboration platforms, enable firms to cultivate a collectivist culture and facilitate new ways of learning. By doing so, organizations can create a buffer against disruptions (Pal, Torstensson, and Mattila 2014).

Second, absorptive capacity and adaptive capability. Organizational resilience involves the ability to adapt by recombining existing and novel resources. Digital tools enhance this capability by providing platforms for collaboration, innovation, and responsiveness to external events (Carpenter et al. 2001). For example, cloud-based services enable flexible and rapid organizational scaling, as well as nimble adaption to changes in demand (Li et al. 2016).

Third, robustness. Digital technologies can bolster organizational and regional robustness to withstand and recover from external shocks and to quickly return to equilibrium (Iacobucci and Perugini 2021). Investing in robust cybersecurity, for example, can prevent or mitigate the effects of cyberattacks, preserving business continuity and integrity (Gaurav, Gupta, and Panigrahi 2022).

Fourth, revitalization. In addition to a proactive capability, resilience offers as a revitalization ability that enables firms to maintain a competitive advantage after a crisis (Smallbone et al. 2012). Digital tools, such as real-time monitoring systems and driven recovery with artificial intelligence solutions, can accelerate response time during a crisis, allowing organizations to recalibrate their operations (Data Catalyst Institute 2020) swiftly.

For instance, sophisticated artificial intelligence models can predict potential risks, cloud computing can enhance adaptability during a crisis, and machine learning can assist in learning from disruptions to strengthen future responses.

We conclude, therefore, that digitization for entrepreneurs is not merely auxiliary, but rather is central to each aspect of organizational resilience, whether in anticipation, response, adaptation, or recovery from crises and at different stages of entrepreneurial growth (Audretsch et al. 2023). Their effective integration and use can transform how businesses approach resilience, fostering a more agile and robust organizational environment.

3. Papers in this special issue

The first paper by Rawhouser, Vismara and Kshetri (2023) entitled ‘Blockchain and vulnerable entrepreneurial ecosystems’, has demonstrated the role of blockchain technology in starting new ventures using the vulnerable entrepreneurial ecosystems perspective. More specifically, the authors examine how blockchain technology affects six domains of entrepreneurial ecosystems identified by research, such as policy, finance, culture, human capital, and markets. This work is important as it uncovers the nature and way that blockchain technology for entrepreneurial activity and helps to better understand the opportunities created by this technology, as well as provide practical implications on how blockchain technology can be adopted to improve the vulnerability of entrepreneurial ecosystems and communities.

The second paper by Ferreira et al. (2022), entitled ‘Knowledge strategies and digital technologies maturity: effects on small business performance’, demonstrates how digital technologies have transformed entrepreneurial activities and increasingly impacted the strategies of small businesses, which, given their size, may find it more difficult to withstand and respond to digital challenges. Their study investigated the influence of knowledge strategies and the availability of digital affordances in a region (Belitski, Korosteleva, and Piscitello 2023) on small businesses’ performance. Using a sample of small businesses, the authors identified how external codification, internal codification, external personalization, and internal personalization strategies of small businesses are used in performance management, revealing that the level of knowledge intensity and digital systems maturity of a firm are two boundary conditions for small business performance in crises.

The third paper by Guerrero, Mickiewicz and Qin (2023), entitled ‘Entrepreneurial growth aspirations during the COVID-19 pandemic: the role of ICT infrastructure quality versus policy response’, using data on entrepreneurship in Chile, investigates the relationship between quality of information and communication technology (ICT) infrastructure and the effectiveness of crisis-specific policy response for entrepreneurial aspirations and growth. Interestingly, they extend prior research which showed that enhancing the quality of ICT infrastructure is a key strategy for building robust entrepreneurial ecosystems (Audretsch and Belitski 2017; Audretsch et al. 2021). The way ICT infrastructure enhances entrepreneurs’ growth ambitions during the crisis is by providing a reliant crisis-specific response and facilitating an ecosystem framework.

The fourth paper by Bertschek et al. (2023), entitled ‘German financial state aid during COVID-19 pandemic: Higher impact among digitalized self-employed’ analysis whether government policies may increase entrepreneurship resilience using the example of German financial state aid during COVID-19 pandemic. Using real-time survey data on self-employed and German federal government aid data comprising more than 20,000 observations and extending prior research on public support during the COVID-19 pandemic (Block et al. 2022), authors calculated the impact of this programme on entrepreneurial confidence to survive. In addition, the authors investigated how the digitalization level of self-employed individuals influences the programme’s effectiveness. Their results overwhelmingly support the role that the emergency-aid programme had on the confidence of self-employed to survive the crisis. However, self-employed people whose businesses were highly digitalized benefitted much more from state aid than those whose businesses were less digitalized, supporting prior research on small business resilience in Europe (Data Catalyst Institute 2021) and the United States (Data Catalyst Institute 2020). Of note, the quality of the regional broadband infrastructure played a pivotal role in increasing entrepreneurial confidence and, hence, the effectiveness of the emergency aid programme in every specific region, extending the Guerrero et al. (2023) study.

In the fifth paper, Schmid and Welter (2023)’s ‘In danger of being left behind? Media narratives of the digital transformation in the German Mittelstand’ uses newspaper articles to produce a meta-of The COVID-19 shock response strategy of small and medium firms (Mittelstand) in Germany from reports about the digital transformation which took place during the COVID-19 crises. In terms of content, the media focus on technical issues authors were able to understand the speed and scope of digital transformation in the Mittelstand using distinct media narratives. Theoretical analysis uncovered where small and medium-sized firms in Germany needed support to master absorptive capacity and skills for digital transformation. The positive narrative reinforces narrow stereotypes of what firms are successful with digital transformation, contributing to the growing body of entrepreneurship research about small business response to external shocks through digital transformation.

The sixth paper by Bruno et al. (2023) ‘Sectoral digital capabilities and complementarities in shaping young firms’ growth: evidence from Europe’, investigates how digitalization impacts young firms’ growth using longitudinal panel data from the EU’s new ventures during 2010–2018 and guides a reader on the role of digital sectoral capabilities in affecting young firms’ growth. In addition to individual characteristics of entrepreneurs, how digital the sector is matters, as well as whether the digital capabilities of a sector could be leveraged to complement growth in young firms. The authors demonstrate that business contexts that are characterized by high digitization but do not have sufficient skills and capabilities do not grow or grow slowly, while it’s the opposite for firms with high skills and capabilities located in R&D sectors, adding to skill composition for high growth. The effects of digitalization also vary depending on the level of competition within each sector.

The seventh paper by Thurik et al. (2023) entitled ‘Techno-overload and well-being of French small business owners: identifying the flipside of digital technologies’ emphasizes the potential risks of technology such as technostress. While digital technology is an important by-product of ICT, entrepreneurs often experience techno-overload, which describes when ICT usage demands to work faster and longer with a paucity of research that has dealt with the technostress of small business owners. This is surprising since work overload in general has been identified as an important dimension of job stress for small business owners, and technostress has been identified as an important impediment for workers in general. The authors demonstrate the effect of techno-overload on well-being outcomes such as composite measures consisting of physical well-being, mental well-being, sleep quality, burnout, and loneliness, and conclude with several policy and practical implications to minimize technostress. Using three data sets of French small business owners, it allowed the authors to identify the contextual effects of the COVID-19 pandemic before, after, and during Covid-19.

The eighth paper is by Urbano et al. (2023) entitled ‘Inside out: The interplay between institutions and digital technologies for SMEs performance’, which deals with an effective digital strategy that provides multifaceted benefits for firms of all sizes, including operational oversight, learning, and effective market interactions. Drawing on regional and multi-layered institutional settings that may directly influence SMEs to adopt, implement, and utilize digital resources, the authors suggest policies and mechanisms to facilitate SME performance. More specifically, this study discusses the effect of SMEs effective digital strategies to benefit from digitization, especially given that some SMEs have reported entirely forgoing digital activities due to resource constraints and exogenous forces in the market, using data on SME digital activities and performance from 88 distinctive institutional regions in Latin America and the Caribbean.

Finally, the paper by Christofi et al. (2023) entitled ‘How Small Firms Build Resilience to Ward off Crises: A Paradox Perspective’ explores the challenges faced by small firms during this crisis and how they coped and built resilience. This study reveals that small firms encountered challenges that were predominantly related to employees, technology, and liquidity – altogether forming three paradoxes during the crisis: short-term and long-term performance; efficiency and adaptability; and safety and profit. The authors suggest coping strategies and, in doing so, contribute to the existing literature on resilience in small firms and the response of organizations to the COVID-19 shock (Belitski et al. 2022; Khlystova, Kalyuzhnova, and Belitski 2022). The findings emphasize that the survival prospects of small firms during the COVID-19 crisis depended on understanding potential paradoxes that needed to be resolved and utilizing the coping mechanisms developed to build resilience.

4. Future research

This special issue identifies four main future research directions upon which subsequent scholars may build. To begin, the first strand of literature in which future research may focus is the effect of digital transformation on firm survival during crises. Future studies should evaluate the long-term impact of the pandemic, the effects of government measures, and digitalization strategies on the survival of firms across various contexts. Furthermore, they should explore the role of digital infrastructure and regional factors. International comparisons would also be notably useful in validating the generalizability of such findings. Within this research field, to date, scholars have investigated multiple dimensions of new digital technologies, infrastructure, and regulation that have enabled small businesses to grow and survive longer, spanning social and human capital, creativity, knowledge and creativity spillovers, and knowledge sourcing (Acs, Audretsch, and Lehmann 2013; Audretsch et al. 2023; Cutolo and Kenney 2021; Huggins and Thompson 2015; Iacobucci and Perugini 2021; Ryan et al. 2021).

The second strand of literature focuses on knowledge management and firm performance during crises, along with the methodological approaches necessary to study the causal relationships between knowledge strategies and firm performance. Research should extend beyond developed countries and knowledge-intensive sectors to determine the generalizability of findings across different regions and industries. There is a pressing need to investigate the connections between knowledge management and resilience capabilities (Bhamra, Dani, and Burnard 2011), particularly in weaker entrepreneurial ecosystems and ecosystems exhibiting a limited culture of entrepreneurship. As digitalization changes businesses, communities, and regions, future research may continue to explore how entrepreneurs adopt digital technologies to learn new skills, innovate their business models, create new value, and contribute to economic and societal progress.

The third strand of literature may highlight both technology’s positive and negative effects (Rapaccini et al. 2020), and its role in transferring cultural understandings and nurturing digital readiness across entrepreneurial firms. For instance, future research should consider investigating the mechanisms and strategies necessary to mitigate technostress, and to foster a greater understanding of who is more susceptible to technology overload and under which conditions. It is crucial to outline potential methods for recovering from technostress, especially given the growing emphasis on the well-being of entrepreneurs.

Lastly, the fourth strand of literature may address cybersecurity and digital literacy for resilience. As businesses embark on their digital transformation journey, understanding the stress caused by ICT security challenges and devising strategies to enhance ‘cyber awareness’ among entrepreneurs becomes paramount. Future research in this domain should encompass the multi-level nature of firm digitalization and its likelihood to thrive and expand. It is our hope that this special issue fosters enhanced dialogue around these and other issues pertaining to digitally advanced entrepreneurship’s role in fostering organizational resilience.

Disclosure statement

No potential conflict of interest was reported by the author(s).