Disruptions, Redundancy Strategies, and Performance of Small Firms: Evidence from Uganda

Amrita Kundu (), Stephen J. Anderson () and Kamalini Ramdas ()
Additional contact information
Amrita Kundu: McDonough School of Business, Georgetown University, Washington, District of Columbia 20057
Stephen J. Anderson: Mays Business School, Texas A&M University, College Station, Texas 77843
Kamalini Ramdas: London Business School, Regent’s Park, London NW1 4SA, United Kingdom

Management Science, 2024, vol. 70, issue 12, 8265-8283

Abstract: We study the impact of firm-specific business disruptions on the performance of small emerging market firms and test the effectiveness of building in redundancies to buffer against disruptions. Managerial disruptions result in the absence of the entrepreneur-owner, whereas operational disruptions lead to a shortage of critical resources, for example, inventory or electricity. We propose the use of relational redundancy—that is, the availability of a trusted and capable person with whom the entrepreneur-owner has an existing relationship, who can manage the business in his or her absence—to recover from managerial disruptions. We also examine whether resource redundancy—for example, maintaining safety stock or electricity backup—helps recover from operational disruptions. In the absence of publicly available data, we hand-built a panel data set by interviewing 646 randomly selected small firms over four time periods in Kampala, Uganda. 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 decrease by 13.8% ( p = 0.013), and its sales growth decreases by 18.8 percentage points ( p = 0.070). Importantly, we find that both managerial and resource redundancies can help firms build resilience against the negative impact of disruptions. In some cases, firms with high levels of redundancy are able to completely overcome the negative effect of disruptions on sales and sales growth. We discuss implications for entrepreneurs, policymakers, and large multinationals that buy from or sell to small emerging market firms.

Keywords: business disruptions; redundancy strategies; small firms; firm resilience; emerging markets; natural experiments (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://dx.doi.org/10.1287/mnsc.2023.4978 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:70:y:2024:i:12:p:8265-8283

Access Statistics for this article

More articles in Management Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().