Entrepreneurs in uncertain times

The Covid pandemic caused huge economic disruption, and widespread unemployment, pushing many people moving towards self-employment. But it happened in a business landscape which had been transformed in the previous two decades by digital technologies which allowed small businesses to trade nationally and even internationally, giving them a significant collective role in the economy.

During the pandemic, government support – through subsidies, furlough, and cash transfers – made it easier for businesses to survive. We wanted to explore how these two factors of financial support and digital technology worked together to affect entrepreneurship.

Theories and background

Entrepreneurs always face risk and uncertainty, and there is already a lot of research on how the market might pull (through opportunity) or push (out of necessity) people into starting businesses. We wanted to look at something which hasn’t been examined nearly as much: chance.

Although the pandemic was a shock to the economy, the UK Inter-Departmental Business Register shows that the trends of people registering new businesses followed the pattern of waves of COVID-19 and lockdowns. This seems counter-intuitive if we think of entrepreneurs as people who have a grand plan or a carefully worked out strategy for their business. Why launch something when the risks are higher than usual?

The study theorises the existence of ‘chancer’ entrepreneurs – individuals who strategically respond to temporarily available support during exceptional circumstances, acting with urgency to capitalise on fleeting opportunities. (The use of ‘chancer’ is to describe entrepreneurs who ‘grab a chance’ to realise time-sensitive business opportunities, rather than to imply untrustworthiness.)

We investigated four linked hypotheses:

• government support increases people’s intentions of becoming an entrepreneur
• it also increases the likelihood of being self-employed
• internet use increases entrepreneurial intentions, especially for chancers in economic uncertainty
• internet use increases the likelihood of self-employment.

Using the data

We used Waves 10-12 of Understanding Society, covering 2019-22, and in particular looked at the answers to two questions:

• Would you like to start up your own business?
• What is your current labour situation?

We also considered people’s use of technology (“How often do you use the internet for your personal use?”), and any government benefits they received – as well as taking age, gender, education, homeownership and other factors into account.

Our findings

We found that support from government and other institutions had a positive influence on aspiring entrepreneurs and self-employment, with a stronger influence during the pandemic than before. Frequent use of the internet was also positively associated with entrepreneurial aspirations during Covid, and with self-employment before the pandemic. Income from government increased the likelihood of both entrepreneurial intentions and actions, supporting our first two hypotheses.

Higher frequency of internet use also increased the chances of people aspiring to start their own business (during Covid), and of being self-employed (before the pandemic) – supporting our third and fourth hypotheses. The pandemic drove people to do everything online, and for some enterprising people this involuntary digitalisation of life may have increased their entrepreneurial aspirations. When some saw only hard trials ahead, others saw an environment conducive to testing business ideas.

However, there were some differences by age group and gender. Women aged 16-24 are more likely to have entrepreneurial aspirations than those aged 25-64, but the younger women are less likely than men of the same age to aspire to starting their own business, and less likely to be self-employed. Women in the older age group were also significantly less likely than men to aspire starting their own business, or to be self-employed.

We also found that frequent use of the internet among people with lower earnings increases the probability of them being self-employed. However, earnings did not have a significant impact on the chances of being self-employed for younger people. This may be because younger people are more used to digital technologies, especially social networks and digital payment systems.

What do our results mean?

The evidence of our research – and earlier work – shows that entrepreneurs act like gamblers. In a crisis, or any situation where government support is available, people have less fear of their business failing, and feel more inclined to ‘roll the dice’.

Also, being a frequent internet user can encourage people’s entrepreneurial aspirations, simply through increased familiarity with tools such as digital payment systems. The pandemic seems to have discouraged people in higher earning groups from launching new businesses, but people who were furloughed – who weren’t unemployed, but faced a fall in income – may have had the space to consider starting their own business. People who were more used to using the internet were better placed to take advantage of these opportunities.

If we take these two elements together, they can complement each other, making a business launch easier and less risky. In other words, support for businesses doesn’t just provide short-term relief – it can shape entrepreneurial behaviour. The traditional view is that institutions are simply either barriers to or enablers of entrepreneurship, but our results suggest that government support can reduce risks, particularly for ‘chancer’ entrepreneurs who might not otherwise launch a business.

Implications for policy

Clearly, government support is crucial in times of economic uncertainty. The next economic shock may come from an entirely different source, but financial assistance can mitigate its impact, and encourage people to take calculated risks. To be effective, though, policies must have a long-term vision. For example, governments could pair financial support with entrepreneurship training, digital literacy programmes, and access to business advisory services.

Policymakers should also invest in high-speed internet, affordable digital tools, and digital skill development to make sure aspiring entrepreneurs – particularly from lower-income backgrounds – can make full use of these opportunities. Public-private partnerships could also help to expand access to e-commerce platforms, digital payment systems, and online marketplaces.

Combining these elements – long-term support and robust infrastructure – together can create an environment that helps entrepreneurs move from crisis-driven necessity to long-term economic self-sufficiency.

It’s also important for governments to think about whole systems. As businesses grow, they spend more on the services they need, often supplied by other micro and small businesses in their local area. These symbiotic relationships need to be considered in economic policy decisions.

Perhaps most importantly, we looked at the often overlooked factor of chance in entrepreneurship, and governments need to do the same. With programmes in place, the next economic shock could be more easily overcome.

Read the research

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