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

Karolis Matikonis*, Byron Graham

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

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Abstract

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.

Original languageEnglish
Number of pages28
JournalInternational Small Business Journal
Early online date28 May 2023
DOIs
Publication statusEarly online date - 28 May 2023

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