Disruptions, Resilience and Performance of Emerging Market Entrepreneurs: Evidence from Uganda
43 Pages Posted: 27 Jun 2018
Date Written: June 20, 2018
We examine the effect of firm-specific business disruptions on the performance of small firms in emerging markets. We study the impact of both managerial disruptions (which result in the absence of the entrepreneur-owner or more broadly a key manager) and operational disruptions (e.g., supply glitches). We examine the effectiveness of resilience strategies in buffering against disruptions. We propose the use of relational resilience - i.e., the availability of suitable cover for the absent entrepreneur / key manager - as a measure of buffering against managerial disruptions. We also examine whether resource resilience (e.g., maintaining safety stock) helps recover from operational disruptions. In the absence of publicly available data, we hand-build a panel dataset by interviewing 646 randomly selected small firms over four time periods in Kampala, Uganda between June 2015 and November 2016. We find that disruptions are highly prevalent and have a statistically and economically significant effect on firm performance. When a firm faces multiple exogenous and severe disruptions in a six month period, its monthly sales go down by 13.7% (p = 0.013) and sales growth reduces by 17.1% on average over the six months (p = 0.070). Importantly, we find that both relational and resource resilience significantly buffer against the negative impact of disruptions; in some cases firms with high resilience are able to completely overcome the negative effect of disruptions on sales and sales growth. We discuss implications for policy makers and for large multi-nationals that buy from or sell to small emerging market firms.
Keywords: business disruptions, resilience, entrepreneurs, natural experiment, emerging markets
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