New study on “Entrepreneurs in the COVID-19 pandemic – an interim assessment after two years”

The COVID-19 pandemic has presented many small business owners and solo self-employed people with massive challenges. What consequences have the restrictions of the past two years had from the perspective of this group?

The COVID-19 pandemic has presented many small business owners and solo self-employed people with massive challenges. What consequences have the restrictions of the past two years had from the perspective of this group? How have government aid measures worked? And where are there shortcomings? Initial answers are provided by a recent study with the participation of ifm Mannheim.

Since 13 March 2020, the federal and state governments have repeatedly restricted economic life to combat the COVID-19 pandemic. Businesses in various sectors were affected by this – small businesses often to a particular extent. Support measures such as Corona emergency aid or KfW fast loans were intended to help these companies cope with the shock.

The study “ReCOVery. Entrepreneurial behaviour and government support measures in the COVID-19 pandemic” draws an initial balance on the basis of in-depth interviews with entrepreneurs from all over Germany: How did small entrepreneurs and solo self-employed people deal with the crisis? How did government support measures work? The study was conducted by ifm Mannheim together with four other research institutes and the Bertelsmann Stiftung.

The key result of ReCOVery is that the various aid packages have had the hoped-for stabilising effect on many self-employed individuals and small businesses. Direct payments such as the coronavirus bridging aid, but also the option of short-time work for employees subject to social security contributions, have opened up room for manoeuvre for actively dealing with the crisis.

“The coronavirus aid has had a positive effect. However, targeting and needs orientation as well as fair, fast and smooth access to aid should be better organised in future crises.”
Dr Alexandra David, Institute for Work and Technology (IAT),
Co-author of ReCOVery

However, the study also shows that state aid measures are only one of the elements that determine the ability of companies to survive. The entrepreneurial spirit and creativity of the self-employed were also important. Those who actively dealt with the exceptional economic situation were generally able to open up prospects for their own business. For example, the study shows that many entrepreneurs in the catering and retail sectors used the leeway to develop new sales channels or digitalise parts of their business model.

However, the positive overall picture should not obscure specific shortcomings in the implementation and communication of coronavirus aid. The information provided by entrepreneurs from knowledge-intensive sectors as well as the catering and retail industries suggests that the government support measures would have been more effective if they had been accompanied by communication and information measures more tailored to the target group.

“A central information page and a network platform for the self-employed to exchange information should be set up as a preventative measure for future crises.”
Dr Susann Schäfer, Friedrich Schiller University Jena,
Co-author of ReCOVery

In addition, the experts recommend the development of a financial instrument to secure a minimum income for solo self-employed and small business owners. The study indicates that the temporary facilitated access to basic income support for solo self-employed persons, freelancers and small business owners has only been utilised to a limited extent. It would be conceivable, for example, to include the cost of living for this group in the bridging assistance in future.

The authors also recommend setting up structures to deal with future crises. One building block for this could be a permanent expert council. This should work towards ensuring that action can be taken more quickly, in a more needs-orientated and targeted manner in the event of future crises. “Such an interdisciplinary council would make a concrete contribution to increasing the resilience of companies and thus the economy as a whole against future external shocks,” says co-author Armando García Schmidt from the Bertelsmann Stiftung.

Information on the study

The “ReCOVery” project was carried out jointly by the Institute of Labour and Technology at the Westphalian University of Applied Sciences Gelsenkirchen (IAT), the University of Jena, the Institute for SME Research at the University of Mannheim (ifm Mannheim), the Institute for SME Research Bonn (IfM Bonn), the Migrant Economy Unit in the IQ Network and the Bertelsmann Stiftung. Ten authors contributed to the study. The study is based on semi-structured in-depth interviews with a total of 34 entrepreneurs from Germany. The interviews were conducted from January to August 2021. The selection of interviewees aimed to maximise variation in terms of how crisis-affected the industry (knowledge-intensive services as well as retail and catering), gender and migration background.

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