chapter  6
12 Pages


ByScott Holmes, Michael T. Schaper

The Whatnows believe external factors such as general economic uncertainty and strong competition from other small and large businesses – both online and offshore – are holding them back. This chapter shows how the different factors in relation to economic uncertainty might impact on small firms. Economic uncertainty is typically associated with an economic downturn, or even worse, a recession. Although both large and small firms will be affected during the downturn, a number of researchers have suggested that during a recession small firms are hardest hit as they are more sensitive to fluctuations. Cowling et al. showed that although growth orientation among small firms generally declines during a recession, entrepreneurs with higher growth ambition tend to show more resilience and can recover relatively quickly when the recession comes to an end. Economic downturn generally leads to some deterioration of credit markets, resulting in tightening of credit supply by banks and higher borrowing costs for small businesses.