The Effects of COVID-19 on U.S. Small Businesses: Evidence from Owners, Managers, and Employees

Abstract

We analyze a large-scale survey of small business owners, managers, and employees in the United States to understand the effects of the COVID-19 pandemic on those businesses. We explore two waves of the survey that were fielded on Facebook in April 2020 and December 2020. We document five facts about the impact of the pandemic on small businesses. (1) Larger firms, older firms, and male-owned firms were more likely to remain open during the early stages of the pandemic with many of these heterogeneities persisting through the end of 2020. (2) At businesses that remained open, concerns about demand shocks outweighed concerns about supply shocks though the relative importance of supply shocks grew over time. (3) In response to the pandemic, almost a quarter of the firms reduced their prices with price reductions concentrated among businesses facing financial constraints and demand shocks; almost no firms raised prices. (4) Only a quarter of small businesses had access to formal sources of financing at the start of the pandemic, and access to formal financing affected how firms responded to the pandemic. (5) Increased household responsibilities affected the ability of managers and employees to focus on their work, whereas increased business responsibilities impacted their ability to take care of their household members. This effect persisted through December 2020 and was particularly strong for women and parents of school-aged children. We discuss how these facts inform our understanding of the economic effects of the COVID-19 pandemic and how they can help design policy responses to similar shocks. This paper was accepted by Tomasz Piskorski, finance.

Management Implications of the COVID-19 Pandemic: A Scoping Review

“…Thus, leveraging the job transition literature to understand how employees are successfully navigating the return to work would be useful. Likewise, our review revealed that certain employees (e.g., women, parents, Asian;Alekseev et al, 2022;Jun & Wu, 2021;Leroy et al, 2021) may be differentially affected by the pandemic. Such disparate outcomes may continue after the pandemic.…”

“…Specifically, female managers with children (especially young children) generated a monthly average of 9% lower returns in the shock month of school closures. Although many studies have suggested that COVID-19 had a disproportionate effect on women's well-being due to increased work-family boundary permeations and work-family conflict (e.g., Alekseev et al, 2022;Leroy et al, 2021;Shockley, Gabriel, et al, 2021), this finding is significant because it quantifies the cost of lost childcare. Sergent and Stajkovic (2020) found that gender influenced how effectively state leaders (i.e., governors) in the United States managed their states' responses to the pandemic.…”

“…Several articles in our review revealed that boundary permeations were associated with negative outcomes, including higher family-to-work interference, work-to-family interference, emotional exhaustion, and lower performance (e.g., Leroy, Schmidt, & Madjar, 2021). Indeed, Alekseev et al (2022) found that individuals’ abilities to focus on work and manage responsibilities at home were hindered by increased household responsibilities and work responsibilities, respectively, and this was especially true for women and parents of school-age children. Similarly, Hu, Chiang, Liu, Wang, and Gao (2023) stated that husbands and wives experienced an increase in work-family conflict when working at home, which increased psychological withdrawal from their families.…”

“…Given that work-nonwork interruptions affected women more often than men (Alekseev et al, 2022; Leroy et al, 2021), it is understandable that scholars sought to understand how women coped with this increase in boundary permeations. To address this issue, Kossek, Dumas, Piszczek, and Allen (2021) identified strategies that allowed highly career-invested women to remain in the workforce, and they found that these women strategically concealed and/or revealed nonwork roles to maintain their professional images in an effort to advocate for support and change.…”

“…Yet, looking to other businesses was not the sole criterion used for organizational decisions. In a survey of US small business owners, managers, and employees, Alekseev et al (2022) identified other criteria that factored into critical organizational decisions, such as staying open, raising or lowering prices, and obtaining financing during the pandemic (e.g., bank loans, government assistance). They found that larger, older, and male-owned businesses were more likely to stay open when the pandemic began, and business owners were more concerned about demand shocks than about supply shocks (although their supply concerns grew as the pandemic continued).…”