Benefits of Covid regulation to small and micro businesses

Aim

The Covid pandemic, an extreme regulatory event, produced many regulations and quasi-regulatory guidance that affected smaller businesses. The pandemic was arguably the biggest stress test ever of governments’ ability to design and implement regulations at speed. The vast majority of small businesses had to take immediate actions as a result of the regulations that were introduced, however their experiences were far from uniform. There were undoubtedly many difficulties that businesses experienced in responding to Covid regulations, however we also found evidence of various benefits. We define benefits as material advantage to the operation and/or profitability of the business, introducing innovating practices, and/or perceived improvement to the well-being of the owner-managers and significant others associated with the business.



Our paper focuses on the extent, forms and reasons given for the benefits owner-managers perceived and/or realised from the implementation of Covid regulations. Despite the weight of political and media opinion (Vukovic, 2012; Atkinson-Small, 2012) and research (Chittenden et al., 2002) on the disproportionate burden of regulation for small businesses, some research has acknowledged that benefits can and do arise (Kitching and Smallbone, 2010: 14; Kitching et al., 2015a). However, there is a lack of research knowledge about the experience of such benefits (see Mallett et al. 2019: 310). Our first aim is to seek to characterise in more detail than previous research both the variety and form of benefit that regulation can provide for the experience of running a small business. Our second aim is speculative and conceptually driven. Our empirical evidence suggests that the aggregate impact of Covid regulations – an extreme regulatory event - for some businesses was beneficial in enabling owner-managers to reflect on the operational effectiveness and the purpose their businesses serve for them.



Research Design

Our paper reports on survey and interpretive research conducted in 2021-22 and investigates how small businesses experience regulations in a crisis. In August 2021, in partnership with the FSB (Federation of Small Businesses) we conducted an online survey of small businesses across the UK. The timing was significant as it enabled us to capture data from small businesses who had experienced more than 12 months of adapting their strategy and operations as a result of understanding and responding to regulation, new and pre-existing, under pandemic conditions. The final sample comprised 991 responses with the vast majority of those respondents being members of FSB. Rather than asking about broad regulatory categories the survey sought to provide a novel and valuable level of granular detail by focusing as far as possible on specific regulations which were new or amended to deal with the pandemic, as well as pre-existing regulations that may have taken on more significance during a pandemic. To provide added depth and explanation to the patterns revealed by the survey, we conducted 23 follow up interviews with individual business owners.



Contribution

As well as challenges and constraints our research shows businesses experienced benefits. We focus on the extent, forms and reasons given for the benefits owner-managers perceived and/or realised from the implementation of Covid regulations. Existing research does not detail benefits or conceptualise the broader implications of extreme event-related regulatory change in creating new conditions for business benefits. Through systematic analysis we develop a three-fold taxonomy of benefits relating to operational practices, strategic decisions and reflective dynamism.



Demonstrating that even in the depth of the biggest regulatory event in recent history, business benefits are derived is no small finding, and confirms the research of those that have sought to tilt the research focus away from the rhetoric of burden (e.g. Kitching et al., 2015a; Mallett et al., 2019). Our work continues theirs, and our paper develops a vocabulary with which to better understand benefits and regulation at the micro-sociological level. We do not seek to underplay the difficulties caused by Covid regulations. We focused on benefits because we found it surprising and interesting given the serious and all-encompassing nature of the regulation, and because the literature gives an incomplete account of such benefits (Kitching et al., 2015a: 139; Mallett et al. 2019: 310). Above all, we find that Covid regulation seems to have created a consequential strategic space (Jones et al., 2010) for some firms where a form of reflective dynamism led to a meta-benefit of both better business and more holistic personal outcomes.



We then conclude by proposing a research agenda for further research on the business benefits of regulation, and briefly explore the broader theoretical implications of the suggested relationship between extreme regulatory events, small business reflective dynamism and innovating practices.