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8/9/2019 Moita Antecedents of Organizational Resilience in Economic Crises an Empirical Study of Swedish Textile and Clothi…
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Antecedents of organizational resilience in economic crises—an
empirical study of Swedish textile and clothing SMEs
Rudrajeet Pal a,b,n, Håkan Torstensson a,1, Heikki Mattila a,b,2
a The Swedish School of Textiles, University of Borås, Bryggaregatan 17, SE-50190, Borås, Swedenb Department of Material Science, Tampere University of Technology, P.O. Box 589, FIN-33101, Tampere, Finland
a r t i c l e i n f o
Article history:
Received 22 May 2012Accepted 27 February 2013Available online 15 March 2013
Keywords:
Resilience
Crisis
Small and medium-sized enterprise
SME
Textile and clothing
Sweden
a b s t r a c t
Economic recessions have created challenges for small and medium-sized enterprises (SMEs) and
contributed to disruptions requiring them to be resilient. At times of economic crises, SMEs face majorthreats to their nancial performance and ultimately to their survival. The average number of Swedish
textile and clothing (T&C) rms that went bankrupt during the recent crisis (2007–09) escalated twofold
compared to the average over 2000–10. Following the 1990s economic crisis nearly 12 per cent of the
T&C companies went bankrupt in 1994–95. The structural industrial statistics also plummeted in these
crisis years, aggravating many internal problems in SMEs as a ripple effect.
This study concentrates on the constraints faced by Swedish textile-related SMEs, primarily during
the economic crises of the past two decades (1990–93 and end 2007–09), and identifying the
antecedents and their different degrees of inuence on economic resilience. It also deepens the
understanding of the underlying patterns in the antecedents, observed in SMEs, favouring or inhibiting
resilience due to their signicance or decit, respectively.
The paper adopts an exploratory research conducted in two phases, rst through a survey and
followed by a series of interviews, responded by eight Swedish T&C SMEs. Annual reports provide a
detailed account of the nancial performances of these rms. A conceptual resilience framework was
developed earlier, based on a review of extant literature.
Findings provide insight on how the responding
rms considered resourcefulness, viz. cash
ow andinvestment nance, relational networks and material assets, along with ‘dynamic competitiveness’
through strategic and operational exibility to be key enablers of resilience and nancial performance,
mostly through generation of protability, cash ow/liquidity and sales turnover. Responses also
highlighted the indirect inuence of the ‘soft’ learning and cultural aspects like attentive leadership
and collectiveness on economic resilience, considered tacit and ingrained in small or medium-sized
family businesses. Additional process initiatives, in particular growth and continuity strategies, were also
emergent patterns to properly utilize and direct the antecedents for resilience development. These are
benecial for rms to understand the key areas, in which to invest for developing resilient business
models.
& 2013 Elsevier B.V. All rights reserved.
1. Introduction
The recent economic recessions and global trade conditions
have created challenges for many Western economies and theirembedded industries, particularly to the small and medium-sized
enterprises3 (SMEs). According to Acs et al. (1990), SMEs are
particularly vulnerable to failures in both continuous shifts and
unpredictable events. They are susceptible to nancial uctuations
(i.e. cash ow), legislation, supply network relationships (i.e.
power issues), changing customer requirements and demandsand even collapsing of national nancial systems (as it happened
recently in Greece) (Bhamra and Dani, 2011).
The Scandinavian market, however, has been somewhat stable
with stagnant growth rates though the main export market has
fallen during the recent global credit crunch since 2007–08 (Keay,
2012). There has not been any particular evidence showing the
effect has been more pronounced in case of the textile-related
Contents lists available at ScienceDirect
journal homepage: www.elsevier.com/locate/ijpe
Int. J. Production Economics
0925-5273/$- see front matter & 2013 Elsevier B.V. All rights reserved.
http://dx.doi.org/10.1016/j.ijpe.2013.02.031
n Corresponding author at: The Swedish School of Textiles, University of Borås,
Bryggaregatan 17, SE-50190, Borås, Sweden. Tel.: þ46 704 294 791;
fax: þ46 33 435 40 09.
E-mail addresses: [email protected] (R. Pal),
[email protected] (H. Torstensson), heikki.r.mattila@tut. (H. Mattila).1 Fax: þ46 33 435 4009.2 Fax: þ358 3 3115 2955.3 The European Commission (2011) denition of SMEs is used as enterprises
with headcount lesser than 250 or turnover≤€ 50 million or balance sheet total≤€
( footnote continued)
43 million (http://ec.europa.eu/enterprise/policies/sme/facts- gures-analysis/sme-
denition/index_en.htm , 14.02.2012).
Int. J. Production Economics 147 (2014) 410–428
http://www.elsevier.com/locate/ijpehttp://www.elsevier.com/locate/ijpehttp://dx.doi.org/10.1016/j.ijpe.2013.02.031mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htmhttp://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htmhttp://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htmhttp://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htmhttp://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htmhttp://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htmhttp://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htmhttp://dx.doi.org/10.1016/j.ijpe.2013.02.031http://dx.doi.org/10.1016/j.ijpe.2013.02.031http://dx.doi.org/10.1016/j.ijpe.2013.02.031http://dx.doi.org/10.1016/j.ijpe.2013.02.031http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htmhttp://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htmmailto:[email protected]:[email protected]:[email protected]://crossmark.crossref.org/dialog/?doi=10.1016/j.ijpe.2013.02.031&domain=pdfhttp://crossmark.crossref.org/dialog/?doi=10.1016/j.ijpe.2013.02.031&domain=pdfhttp://crossmark.crossref.org/dialog/?doi=10.1016/j.ijpe.2013.02.031&domain=pdfhttp://dx.doi.org/10.1016/j.ijpe.2013.02.031http://dx.doi.org/10.1016/j.ijpe.2013.02.031http://dx.doi.org/10.1016/j.ijpe.2013.02.031http://www.elsevier.com/locate/ijpehttp://www.elsevier.com/locate/ijpe
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sectors, but it is noticeable from Swedish central statistics that the
average number of Swedish textile and clothing (T&C) rms that
went bankrupt during the recent crisis (2007–09) escalated two-
fold, compared to the average over 2000–10 (cf. Fig. 1—adapted
from SCB database statistics). The 1990s economic crisis was the
toughest in the Swedish context, with nearly 12 per cent of the
T&C rms going bankrupt in 1994–95. It was also evident that
most of these rms were small with less than 50 employees.4
The structural industrial statistics also plummeted in these
crisis years. For example, during the global credit crunch (2007–
09) the textile and wearing apparel industries made massive losses
(from a prot of 419 mSEK in 2006 to losses of 387, 223 and 155
mSEK, respectively, 2007 onwards) (adapted from SCB database
statistics).5 Other indicators, like the net turnover and total assets,
also reduced by 19.4 per cent and 8 per cent, respectively, though
no substantial dip was observed in other structural indicators.
During the 1990–93 crisis the repercussion was worse as the total
operating revenues and value addition for the industries declined
by 24 per cent and 20.4 per cent, respectively, though it picked up
again in 1994 but did not reach the level before the crisis until
1997.5
It is thus evident that the Swedish textile-related SMEs faced
major threats to their nancial performance and ultimately to
their survival at times of economic crises, and thus economic
resilience has become a prerequisite to be fostered in such rms in
order to be successful.
In this context, the central objective of the paper is to identify
the nature of problems and constraints faced by Swedish textile
related SMEs, primarily during the economic crises of the past two
decades (mainly 1990–93 and end 2007–09) as well as the
antecedents and the differential degree of inuence they exhibit
on economic resilience. The study also deepens the understandingof the underlying patterns favouring or inhibiting resilience in
such rms.
2. Framework for antecedents of SME resilience
Small- and medium-sized enterprises are highly vulnerable to
times of crisis, then being affected by the cascading and aggravat-
ing effects of several related problems and constraints, especially
regarding nancial and human resources (Vargo and Seville, 2011).
As Thun et al. (2011) asserted, SMEs usually face conditions of
weaker cash ow and less equity reserves; they lack resources and
are overloaded with short-termism, thus, lack the necessary skills
to pursue long-term strategies to drive resilience (Ates and Bititci,
2011; Wesson and De Figueiredo, 2001). However, due to their
relative small size, they are exible, and as Salavou et al. (2004)
assert, market- and learning-oriented SMEs tend to be more
innovative and resilient. The relative strength of SMEs is argued
to be characterized by exibility, adaptability and innovation
(Vossen, 1998), instrumental in fostering resilience, although they
have varying resource constraints. Previous research has found
that SMEs generally lack resources and capabilities (Herbane,
2010; Vossen, 1998), hence attempt to build resilience through
strategic and operational readiness or rapidity (Ismail et al., 2006;
Shef , 2007; Sullivan-Taylor and Branicki, 2011), positive adjust-
ments (Weick et al., 1999) or knowledge creation. Resilience of
SMEs requires knowledge retention through exible workforce,
strategic thinking, and top management support (Levy et al.,
2003), although it has been argued there that SMEs lack knowl-
edge retention. However, SMEs need to improve both their access
to nance and their individual competitiveness for optimizing
their most common constraints, hence, balance their soft and hard
assets (Beer and Nohria, 2000; McElroy, 1996) to develop win-win
solutions (Gunasekaran et al., 2011).
The following section highlights three broad assets, in general
required by rms to bolster resilience. They are resourcefulness,
like nances, materials, people (social assets) etc., competitiveness
(exibility, networking, robustness and redundancy) and ‘learning
and cultural’ aspects (cf. Fig. 2).
2.1. ‘ Resourcefulness’ and resilience
Resource constraint is considered to be a key inhibitor of SME
resilience, while its availability can be a potential enabler as well
(Sullivan-Taylor and Branicki, 2011). From this perspective, a
recent study described that SMEs mainly lack resources like
control, cash and compressed time to respond (Herbane, 2010).
Similarly, Vossen (1998) and Van Gils (2005) described SMEs to be
suffering from resource constraints predominantly material
(related to economies of scale and scope), nancial (cash ow
and investment nance) and technological resources, while
Ghobadian and Gallear (1997) highlighted how this leads to
success or failure of SMEs. Wesson and De Figueiredo (2001)
pointed at a similar lack of long-term resources in SMEs, as they
are overloaded with short-term cash and payment problems,
Fig. 1. Bankruptcy statistics of Swedish textile and clothing rms (1993–2010).
4 Only 2 rms, with number of employees450 were bankrupt in 1995 and
2008 and 1 each in 2000 and 2001.5 Statistiska Centralbyrån (http://www.ssd.scb.se/databaser/makro/start.asp ,
27.02.2012).
R. Pal et al. / Int. J. Production Economics 147 (2014) 410–428 411
http://www.ssd.scb.se/databaser/makro/start.asphttp://www.ssd.scb.se/databaser/makro/start.asphttp://www.ssd.scb.se/databaser/makro/start.asp
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setting them apart from larger organizations. Another key aspect,
found in research, is the lack of external support and synergy
effects for SMEs, which is essential for increased competitiveness
(Fassoulsa, 2006; Ghobadian and Gallear, 1997). Moreover, SMEs
have started outsourcing and market diversication, which high-
lights the need to integrate more information technology and
information systems for signicant SME resilience.
Overall, in the present paper ve categories of resources
(material/systems, nance, social, network, and goodwill) are
highlighted, along the lines of Freeman (2004) emphasizing
resources as (i) wealth as cash and other assets, (ii) systems:
internal coordination, processes and technical expertise, (iii)
human resources: people with requisite skills, and (iv) network
connections and relationships with stakeholders; essential con-
tributors to superior organizational performance, hence resilience.
These ve categories and their relationship to resilience devel-
opment are briey described as follows:
a. Material resources and resilience—Material assets, like stock of
raw materials, work in progress or nished goods as inventory,
used strategically can help to overcome immediate problems of
disruption. Building-up such a system with safety stocks needs
organizational planning to attain internal ef ciency to cushion
every part of an organization (Shef , 2007).
b. Financial resources and resilience—Mobility and deposits of the
nancial assets are other important resources to create a
critical asset stock (Gittell et al., 2006). A large capital baseacts as a buffer or shock absorber and prevents the impacts of
crisis, along with immediate access to adequate insurance
coverage.
c. Social resources and resilience—Freeman (2004) emphasized the
essence of human resources, or people with requisite skills, as a
critical contributor to superior organizational performance.
Teamwork and enhanced trust among the employees are
essential to distinguish organizations having the potential to
bounce back from plausible disruptions by their ability to
develop an internal risk management culture and collaborate
and communicate proactively (Shef , 2007).
d. Network resources and resilience—Collaborative inter-
organizational relationships (IORs) through mergers and acqui-
sitions, strategic alliances or outsourcing help to transfer and
exchange uniquely complementary sets of knowledge
resources and relationships (Leiblein, 2011; Lippman and
Rumelt, 2003), accounting for correct alignment of the organi-
zation, both along the value chain and to the environmental
conditions. This is indispensable in order to reduce and spread
risks and manage market turbulences through appropriate
strategies, enterprise culture and relationship (Shef , 2007).
Networked organizational structures offer greater agility and
adaptability by maintaining countless secured relationships
with quality stakeholders (suppliers, customers, nancers
etc.) thus intertwining integrally to organizational success
patterns (Leiblein, 2011; Starr et al., 2003). Such strategic
choices yield fullest utilization of slack resources, sharing of
risks and also provides nancial reserves and bargaining power
to rms for organizational growth (Li et al., 2011).
e. Intangible resources and resilience—Building a deep social fabric
of goodwill, inter-personal relationships and brand is also
evident to lay a foundation for developing contextual resilience
(Adler and Kwon, 2002; Lengnick-Hall and Beck, 2005) by
developing deep pockets of intangible resources acting as a
mask to temporarily protect the organization from tightly-
coupled situations (Perrow, 1984).
A unifying resource-based view (RBV) framework justies how
an organization's competitive advantage can be achieved through
possession of various assets and resources (nancial, physical,
human, technological, organizational and reputational) (Grant,1991a,b) for resilience development.
2.2. ‘ Dynamic competitiveness’ and resilience
Effective deployment of heterogeneous slack resources results
in development and reconguration of core competencies in rms
(Eisenhardt and Martin, 2000; Grant, 1991a,b; Prahalad and
Hamel, 1990), like long-term exibility, redundancy and robust
responses (Shef , 2007) fostering competitive advantages, and it is
instrumental in reducing or absorbing market turbulence
(Lengnick-Hall and Beck, 2005). Such dynamic capability develop-
ment is important for response activation in crises, as proposed by
Burnard and Bhamra (2011) as a key determinant of organizational
exibility (Hatum and Pettigrew, 2006) or ‘adaptive capacity’
Fig. 2. Theoretical framework.
R. Pal et al. / Int. J. Production Economics 147 (2014) 410–428412
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needed for developing resilience. Rice and Caniato (2003) stressed
the common approach of rms using reactive instruments, like
exibility and redundancy, to build resilient supply chains.
Here four categories are in focus, viz. (a) exibility,
(b) redundancy, (c) robustness, and (d) networking and their
relationship to resilience development, briey as follows:
a. Flexibility and resilience—In case of SMEs, strategic exibility
appears to be, predominantly in the form of rapid decision-making, rapid and effective internal communications, capacity
for fast learning and the ability to quickly adapt routines and
strategies (Vossen, 1998). Such exible and adaptable beha-
vioral characteristics prove to be key enablers of SME resilience.
In a similar study, rapidity in decision-making and inter-
organizational relationship emerged to be key enablers of
SME potential for timeliness and agility to demonstrate resi-
lience capabilities (Sullivan-Taylor and Branicki, 2011). Such
exible and rapid decision-making criteria were also pointed
out by Vargo and Seville (2011) as a means to yield crisis
strategic readiness. On the other hand, Shef (2007), Shef and
Rice (2005) and Peck (2006) addressed the role of operational
and structural exibility in rms for building resilience, but
mostly in large rms. Resilience can be built in rms through
operational exibility, like by building inter-operable standar-
dized materials and processes, effective lean management,
closeness of operations to demand via postponement, building
ef ciency through training programs, seamless integration of
processes, concurrent engineering techniques, shortened lead
times etc. (Peck, 2006; Shef , 2007). From the resilience
engineering perspective, exibility and agility emphasize the
ability of the system to respond to unexpected situations and
restructure rapidly by developing adaptive capacity (Hale and
Heijer, 2006; Westrum, 2006; Woods, 2006). However, in a
study by Thun et al. (2011), such preventive instruments (on-
time delivery, strategic supplier development, improved track-
ing etc.) rendering operational exibility were found to be
minimal in case of SMEs, due to resource constraints.
b. Redundancy and resilience—Another mechanism for achieving
resilience in rms is by building redundancy of resources, such
as unused capacity, multiple sourcing etc. (Shef and Rice,
2005). Shef (2007) and Shef and Rice (2005) have empha-
sized creation of redundancies for building resiliency, mostly in
case of large rms, though Thun et al. (2011) have shown how
small rms can also thrive on developing redundancy-based
reactive instruments for dealing with crises. However,
Dangayach and Deshmukh (2001) have shown how redun-
dancy building can be an essential precursor for resilience
development in case of non-family rms, but not for small
family-owned ones as they are expected to have the disadvan-
tages of inadequate technological capabilities, lack of nancial
strength and infrastructure. This highlights the trade-off in
balancing the cost of redundancy and generating long-termeconomic benets as an antecedent of resilience (Linnenluecke
and Grif ths, 2010).
c. Robustness and resilience—Organizational robustness is another
imperative element to achieve resilience by resisting disrup-
tions and building reliability (Mangan et al., 2008). Christopher
and Rutherford (2004) suggested that robust organizations
have a culture of quality awareness and ‘lean thinking’, while
Tang (2006) stated that they are effective in deploying con-
tingency plans and resources when facing disruptions. This
enhances the organization's ability to develop internal quality
control on variability and lean processes, thus, adding a great
degree of resilience through stabilized processes, reduced
supply chain variability and low inventory levels (Christopher
and Rutherford, 2004). Total quality management (TQM)
suggests building of robustness through quality managed lean
processes and continuous improvements (CI) to control and
manage disruptions to a great extent, particularly researched in
case of large organizations (Dean, 2010). Ismail et al. (2011)
asserted that robustness is one of the key necessities to develop
SME operational agility, apart from responsiveness and pro-
activeness to develop consistent quality in products and pro-
cesses. In SMEs' customized environment, this calls for imple-
mentation of quality management frameworks and models forcontinuous improvement (CI), as proposed by Kumar et al.
(2011) and other related researches.
d. Networking and resilience—Building networks and knowledge
integration for considerable conceptual slackness in tightly-
coupled situations assert the development of long-term resi-
lience (Schulman, 1993). Such organizational networking and
connectivity not only reduce the risks of crises but at the same
time result in creation of deep interpersonal skills and relation-
ships at the social level (Coutu, 2002). As highlighted by
Sullivan-Taylor and Branicki (2011), increased inter-
organizational relationships enable rapid implementation of
decisions in SMEs, develop supply dependencies and also
trusted relationship with nancial institutions. Similarly,
Demmer et al. (2011) also highlighted the need of ‘executing
renewal’ in SMEs through incorporation of customers in value
chains, externalizing innovations through M&As, alliances etc.
for engendering resilience, as proposed by Reinmoeller and
Baardwijk (2005) for large rms. At the intra-organizational
level, this also adds to the possibilities of reducing ‘silo
mentalities’ and complexities, leading to higher visibility and
trust (Ireland et al., 2002), within the organization.
2.3. ‘ Learning and culture’ and resilience
In an organizational setting, resilience merit is hinged to
various softer, less tangible aspects of an organization such as its
culture, leadership and vision (Seville et al., 2006). Resilience is
thus enhanced through development of specialized knowledge of
individuals and also collectively in an organization to respond
effectively to unfamiliar or challenging situations. Barton and
Christianson (2006) underline the need to learn more about these
organizational- and people-oriented soft processes to create resi-
lience, while McElroy (1996) and Beer and Nohria (2000) mention
the role of soft aspects, viz. people, motivation, communication,
building coalition and training etc., to be pivotal in building
resilient rms through a change process. Some previous organiza-
tional learning theories, from various perspectives, articulate
common traits or behavioral patterns in organizations promulgat-
ing two central themes, viz. (i) collective awareness and learning,
and (ii) change of organizational structure in response to change in
environment (Appelbaum and Gallagher, 2000) (adaptation).
Senge (1990) and (Edmondson and Moingeon, 1998) have popu-larized this newly-conceived concept of organizations for adapta-
tion to the changing environment. On the other hand, group/team
learning reveals equivalent dynamics for developing organiza-
tional motivation, ef cacy and skills and degrees of positive
adjustment for mastering new situations (Sutcliffe and Vogus,
2003). This generates a sense of positive adaptation in the
organization (Bunderson and Sutcliffe, 2002; Edmondson, 1999).
Thus ‘learning and cultural’ aspects, in general, play a pivotal
role in enabling organizational resilience, perhaps to a higher
degree in case of SMEs.
In the present study these aspects have been clustered into
three vital enablers, viz. (a) leadership and top management
decision-making, (b) collectiveness and sense-making, and
(c) employee wellbeing.
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a. ‘ Leadership and top management decision-making ’ and resilience
—In a study, Vossen (1998) described small rms having
relative advantages (over large ones) in terms of rapid deci-
sion-making, capacity for fast learning and rapid internal
communications making them learning-oriented for enabling
resilience. Decision-making to a large extent in SMEs is
subjected to the role of a powerful and decisive CEO, supported
by a powerful top management team (Bourgeois and
Eisenhardt, 1988). Though crisis times can lead to organiza-tional retrenchment and assertion of an authoritarian manage-
ment style in SMEs, due to high proprietary rights of manager-
owners ( Jones, 2003; Rainnie, 1989); entrepreneurial leader-
ship through higher qualications and experience can, on the
other hand, instil adoption of more knowledge creation and
innovation in the rm ( Jones and Crompton, 2009).In many
cases the effect of large-scale economic crises on SMEs can be
signicantly diminished through resilient leadership
(McManus et al., 2008; Mitroff et al., 1992; Penrose, 2000). In
several cases, such inspiring, yet realistic leadership, supported
by an able top management team, proves to be crucial in
corporate turnarounds after the crises (Seville et al., 2006).
b. ‘ Collectiveness and sense-making ’ and resilience—Leadership dur-
ing crises is much more than decision-making (Vargo and
Seville, 2011). It includes the assurance of optimism among
employees, setting out a clear sense of vision and also ascribing
sense-making (Weick et al., 1999) yielding collectiveness. Such
relevant mechanisms for promoting cognitive resilience
(Lengnick-Hall and Beck, 2005, 2009) at the organizational
level are argued to be accumulating knowledge, collective
ef cacy and shared belief, essential for developing coordinative
and interactive dynamics (Bandura, 1998). Such strong collec-
tive identity leads to constructive organizational sense-making
(Weick, 1993, 1995), through positive perception of experi-
ences, emotions, realism (Coutu, 2002) and tolerance, to steer
the organization through crises. Operationally, such learning
capabilities and mindfulness align the organization not only
structurally and strategically but also cognitively towards the
demands of the crises for building resilience (Weick and
Sutcliffe, 2007).
c. ‘ Employee wellbeing ’ and resilience—Role of employee account-
ability and sense of ownership, along with continuous
improvement through knowledge sharing, learning and right
mind-set are essential for organizations to build resilience and,
hence, long-term performance (Keller and Price, 2011). In sum,
working together effectively across the company leads to a
sense of cognitive wellbeing through alignment of the organi-
zational values, corporate culture, shared vision and responsi-
bilities (ideational foundation) for promoting adaptive learning
capabilities (Boisot and Child, 1999; Chakravarthy, 1982).
However, contrary ndings are supported by some notable
researches like Gray (2002), Ates and Bititci (2011) etc., who
highlight that the SMEs are more likely to be owner-centric
(especially the family-owned ones), relying more on informal
routines and focus on day-to-day operations rather than on
long-term growth. This consequently gives evidence that SMEs
fail to embed changes into organizational culture for long-term
sustainability but rather emphasize on short-termism and re-
ghting approaches (Ates and Bititci, 2011).
2.4. Framework diagram
Following the above discussion, based on extant literature on
SME resilience, the key antecedents or enablers of resilience have
been clustered as shown in Fig. 2.
The model has been in accordance to the general way to study
any complex phenomenon and its effects based on consciously
unraveling the antecedents and processes conceptualizing the
phenomenon; as proposed by Davidsson et al. (2007) in case of
studying small rm growths. In the present study, the antecedents
have been clustered into three broad categories viz. (a) assets and
resourcefulness, (b) dynamic capabilities, and (c) learning and
culture. However, an investigation of the process and pathway
adopted for building resilience is beyond the scope of the paperand is left open for future research, even though they are in this
paper categorized as ‘other process initiatives’.
3. Methodology
3.1. Case selection and data collection
Case selection was via theoretical sampling (Flick, 2009; Glaser
and Strauss, 1967). Earlier in the project, annual reports (mainly
income statements and balance sheets) of 20 Swedish rms
(selected via theoretical sampling) were studied for twenty-one
years (1989–2010) to make their Z-score transition proles for
characterizing economic resilience in terms of business ‘health’
(cf. (Pal et al., 2011) for details). Data collection, in this study, was
done in two phases. In phase 1 a survey was conducted between
November 2011 and January 2012, where eight rms were
respondents among these twenty, qualifying them for next phase
of interview to get more in-depth knowledge on the issue. All the
rms were Swedish textile-related SMEs and family-owned
through most of the time in their history.
The survey questionnaire in phase 1 was based on a deductive
theoretical framework, as shown in Fig. 2. It was categorized into
four sections aimed at nding out the major challenges faced
during crises and to what extent the responding rms regarded
the inuence of the three major resilience antecedents (cf. Fig. 2)
to affect their economic resilience. The predominant nature of the
question was ‘how do you relate the signicance or lack […] to the
economic transition prole […
]’? The questionnaire was translatedfrom English to Swedish and then mailed to the companies for
higher comprehensibility. All the respondents were owner-
managing director of the rms. The survey was customized in a
way, as each of the companies was provided with a project
description and brief analysis and an explanation of its 20-year
Z-score transition prole. Following the survey, an acknowledg-
ment and research ndings synopsis were e-mailed/mailed to
each of the respondents, and they were asked to participate in a
short face-to-face interview.
Each interview, of phase 2, lasted between 45 and 90 min and
with a combination of both focused and semi-structured form of
questions (Flick, 2009). The aim of the interview was to have a
clear understanding of the survey responses made in phase 1. For
this purpose all the companies were emailed a scanned copy of their survey responses. Some of the interview questions were
aimed at identifying directly the reasons (emerged out of the
survey results) behind their Z-score transition prole and its
contributing ratios (focussed), while some were more open in
nature (semi-standardized). All the interviews were conducted in
English and at the respondents' premises.
3.2. Data analysis method
The data analysis followed thematic coding, as the procedure
was derived from the research question, and thus a dened
deductive framework (Flick, 2009). First, the survey results were
analyzed using descriptive statistical techniques suited to the
research objective (cf. Table 2). The closed nature of the survey
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questionnaire allowed the respondents to answer either ‘signi-
cantly’, ‘moderately’ or ‘poorly’ to each question. The scoring
system used in Table 2 along the three categories of resilience
antecedents was obtained by counting the frequency of response
options. The most frequent option is also marked with a (n) while
the last column indicates the frequency of total responses among
all the responding rms (cf. Table 2). This was followed by a short
description of each case in terms of their economic resilience
expressed by Altman's Z-score6 (cf. Table 1; for more details about
the coding see Pal et al. (2011). A deepening analysis is
provided through interpretation of the interviews having been
digitally recorded and transcribed. The coding paradigm suggested
by Strauss (1987), pp. 27–28) was used as follows: rst, a
short description of each case was produced and modied along
the coding process, second, each of the cases was analyzed
individually and nally, a cross-case analysis was made to
Table 1
Case companies—Business description, business ‘health’ and economic resilience.
Case* Business type Business Health in terms of Z-score
Notations: H—Healthy, U—Unhealthy, C—Catastrophic
Economic
resilience
1990–93 2007–09 1990–
93
2007–
09
U Mostly H
1 Manufacturer of safety and
occupational
footwear
1.43–2.58 (unhealthy) between 1989–95, due to low liquidityratio, retained earnings and poor EBIT
3.03–3.06 (healthy) between 2007–08, due toincreasing solvency ratio
2.21–2.39 (unhealthy) between 2009–10, mainly due
to declining EBIT
No No
2 Sewer of air-bag
fabrics
Women-wear
brand marketer
Mostly H Partly H
Yes P ar tly Average 2.98 (healthy most years) between 1990–95 due
to consistent turnover and other Z-score components
Healthy range of 2.98–3.42, except 2008 (2.08) due
to falling liquidity ratio and poor EBIT
U Mostly H
3 Designer and
manufacturer of
shirts and jackets
2.16–2.56 (unhealthy) between 1990–94 due to poor
protability and leverage ratios
Gradual recovery since 1995 (2.97 owing to growing
turnover-ratio)
Over 3 (healthy) due to increasing solvency ratio
(Most of the Z-score components were good)
No Yes
U Mostly H
4 Textile
machinery
Clothing labels
and transfers
Printing
solutions
2.13–2.67 (unhealthy) between 1990–94 due to poor
protability, leverage and solvency ratios and declining
liquidity ratio (declining working capital)
Recovery in 1995 (3.07) due to increasing turnover ratio
Healthy range since 2003 (2.93–3.57), due to high
capital-turnover and solvency, except 2009 (2.65)
due to lowered turnover and protability ratios and
reduced liquidity ratio
No Yes
U Mostly U
5 Weaver of
upholstery
fabrics
1.27–2.66 (unhealthy) between 1990–93 due to low
protability, solvency and leverage ratios
Fast recovery in 1994–95 owing to high sales (turnover
ratio) and solvency ratio (increase in equity)
1.89–2.39 (unhealthy) between 2007–09 due to poor
protability ratio and negative liquidity ratio
No No
U Mostly H
6 Manufacturer of
leather jackets
1.51–2.07 (unhealthy) between 1990–95 due to declining
sales-turnover and poor protability and leverage ratios
Overall ‘unhealthy’ (1989–2010)
0.87–1.61(unhealthy/catastrophic) between 2007–10
due to negative EBIT, declining sales-turnover and
leverage ratio (retained earnings)
No No
U Fully U
7 Weaver of
upholstery
fabrics
0.64–1.01 (catastrophic) between 1990–92 due to negative
liquidity ratio and poor protability (Infact all the Z-score
components were poor)
Recovery in 1993 (3.17) due to high net sales
2.14–2.63 (unhealthy and declining) between 2007–
10 due to poor EBIT, declining net sales (hence
turnover ratio) and declining solvency ratio
No No
U Mostly H
8 Manufacturer of
women
underwear
Unhealthy Z-scores owing to lower turnover ratio along
with poor protability and leverage ratios (except '92, '94)
2.91–3.55 (healthy) between 2007–10 due to good
solvency and turnover ratios
No Yes
n All cases are Swedish SMEs and family-owned for substantial time in their long history. All numbers denoted are Z-score values.
6 Altman's Z-score is generally used to predict bankruptcy potential by
categorizing business as ‘safe’, ‘unsafe’ or ‘distress’ to measure nancial success.
( footnote continued)
It includes criteria of economic viability based on protability, solvency, liquidity,
leverage and activity. Thus it considers factors like working capital, total assets,
retained earnings, protability, net worth or shareholder 's equity, total liabilities
and total sales.
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identify and describe the emergent pattern in the antecedents and
how their inhibition or facilitation inuences economic resilience.
The validity and reliability of the present study is secured as
follows: (a) construct validity—is demonstrated by the derivation of
a deductive resilience framework from extant literature review of
conceptual underpinnings, by the use of multiple sources of
evidence (surveys and interviews) for data triangulation and also
by reviewing the interview drafts along the thematic coding
procedure (Yin, 2009); (b) internal validity—is also justied con-
sidering the pattern matching of general ndings from the survey
and the interviews according to the model to synthesize an
emergent pattern and also support rival explanations highlighting
the inuence of process initiatives and exogenous factors (Yin,
2009); (c) external validity—is also expected to be consistent
considering the generalizability of the resilience framework for
application in case of any environmental turbulence and in any
time-spatiality (Yin, 2009) for most Swedish textile-related SMEs,
though this is beyond the scope of the present research; and
nally (d) reliability—is moderate as by using the same framework
protocol authors reached at conicting revelations about the
inuence of ‘learning and cultural’ aspects on SME resilience,
though the rest of the results were commensurable.
Table 2
Case-based aggregate scoring.
Firms
responses
Case 1 Case 2 Case 3 Case 4 Case 5 Case 6 Case 7 Case 8 Σ
‘Resourcefulness’ factors
2007–09
Signi cantly 9* 8* 6* 4 4 11* 4 0 46*
a¼4, b¼2, c ¼2,
e¼1
a¼3, b¼2, c ¼2,
d¼1
a¼2, b¼2, c ¼1,
e¼1
a¼1, b¼1, c ¼1,
e¼1
b¼2, d¼1, e¼1 a¼3, b¼3, c ¼2, d¼2,
e¼1
a¼2, b¼1, c ¼1
Moderately 3 0 5 8* 7* 2a¼2 11* 4 40a¼2, d¼1 a¼2, c ¼1, d¼2 a¼4, b¼1, c ¼1,
d¼2
a¼5, c ¼2 a¼5, b¼2, c ¼1, d ¼2,
e¼1
b¼3, d ¼2
Poorly 2 6 4 3 4 2 0 11* 32a¼1, b¼1 a¼4, b¼1, e¼1 a¼3, b¼1 a¼2, b¼1 a¼2, b¼1, d ¼1 a¼2 a¼7, c ¼2, d¼1, e¼1
1990–93
Signi cantly 3 5 3 5 2 7* 0 0 25b¼2, e¼1 a¼3, c ¼2 b¼2, e¼1 a¼1, b¼2, c ¼1,
e¼1
a¼1, d ¼1 a¼2, b¼1, c ¼2, d¼1,
e¼1
Moderately 8* 1 7* 7* 9* 6 14* 6 58*
a¼5, c ¼2, d¼1 b¼1 a¼4, c ¼1, d¼2 a¼4, c ¼1, d¼2 a¼4, b¼2, c ¼2,
e¼1
a¼4, b¼1, d¼1 a¼7, b¼3, c ¼2, d ¼1,
e¼1
a¼2, b¼3, d¼1
Poorly 3 8* 5 3 4 2 1 9* 35a¼2, b¼1 a¼4, b¼2, d¼1,
e¼1
a¼3, b¼1, c ¼1 a¼2, b¼1 a¼2, b¼1, d¼1 a¼1, b¼1 d¼1 a¼5, c ¼2, d¼1,
e¼1
‘Dynamic competitiveness’ factors
2007–
09 Signi cantly 7* 8* 3 3 3 8* 6 0 38 f ¼3, g ¼1, h¼1,
i¼2
f ¼3, h¼1, i¼4 f ¼2, i¼1 f ¼3 f ¼3 f ¼5, i¼3 f ¼2, h¼1, i¼3
Moderately 6 1 5 6* 4 2 8* 1 33 f ¼2, g ¼2, i¼2 f ¼1 f ¼2, g ¼1, i¼2 f ¼1, g ¼1, h¼1,
i¼3
h¼1, i ¼3 g ¼1 i¼1 f ¼3, g ¼3, i¼2 h¼1
Poorly 1 5 6* 5 7* 4 0 13* 41*
i¼2 f ¼1, g ¼3, h¼0,
i¼1
f ¼1, g ¼2, h¼1,
i¼2
f ¼1, g ¼2, i ¼2 f ¼2, g ¼3, i¼2 g ¼2, h¼1, i¼1 f ¼5, g ¼3, i¼5
1990–93
Signi cantly 0 7* f ¼2, h¼1, i¼4 1 f ¼1 3 f ¼3 4 f ¼3, i¼1 8* f ¼5, i¼3 0 0 23
Moderately 11* 2 6 6* 3 2 14* 6 50*
f ¼4, g ¼3, i¼4 f ¼2 f ¼2, g ¼1, i¼3 f ¼1, g ¼1, h¼1,
i¼3
h¼1, i ¼2 g ¼1, i ¼1 f ¼5, g ¼3, h¼1, i ¼5 f ¼5, h¼1
Poorly 3 5 7* 5 7* 4 0 8* 39 f ¼1, h¼1, i¼1 f ¼1, g ¼3, i ¼1 f ¼2, g ¼2, h¼1,
i¼2
f ¼1, g ¼2, i ¼2 f ¼2, g ¼3, i¼2 g ¼2, h¼1, i¼1 g ¼3, i¼5
‘Learning and cultural’ factors2007–09
Signi cantly 6* 7* 9* 6* 2 8* 6* 0 44*
j¼3, k¼1.5, l¼1.5 j¼2, k¼3, l ¼2 j¼5, k¼3, l ¼1 j¼3, k¼2, l¼1 k¼1, l ¼1 j¼4, k¼2, l ¼2 j¼3, k¼2, l¼1
Moderately 4 3 1 4 4* 2 3 0 21 j¼2, k¼2 j¼3 l¼1 j¼2, k¼1, l ¼1 j¼2, k¼1, l ¼1 j¼1, k¼1 j¼1, k¼1, l ¼1
Poorly 0 0 0 0 4* j¼3, k¼1 0 1 j¼1 10* j¼5, k¼3, l ¼2 15
1990–93
Signi cantly 2 7* 3 6* 1 8* 6* 0 33*
j¼3, k¼1, l¼1 j¼2, k¼3, l ¼2 k¼2, l ¼1 j¼3, k¼2, l ¼1 k¼1 j¼4, k¼2, l ¼2 j¼3, k¼2, l¼1
Moderately 5* 2 6* 4 5* 2 3 1 28 j¼3, k¼1, l¼1 j¼2 j¼4, k¼, l ¼1 j¼2, k¼1, l ¼1 j¼2, k¼1, l ¼2 j¼1, k¼1 j¼1, k¼1, l ¼1 j¼1
Poorly 3 1 1 0 4 0 1 9* 19 j¼2, k¼1 j¼1 j¼1 j¼3, k¼1 j¼1 j¼4, k¼3, l ¼2
a¼Material/systems assets, b¼Financial assets, c ¼Social assets, d¼Network assets, e¼Intangible assets, f ¼Flexibility, g ¼Redundancy, h¼Robustness, i¼Networking,
j¼collectiveness and sense-making, k¼employee wellbeing, l¼ leadership and top-management decision-making.
n Most frequent response.
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4. Case companies—business type and economic resilience
Fig. 3 below shows the ‘Z-score transition proles’ of all the
case companies over the studied period (1989–2010). The Z-score
transition prole of each case company is obtained by plotting its
Z-score values over the years 1989 to 2010, and classifying them as
either ‘healthy’, ‘unhealthy’ or ‘catastrophic’.
Further interpretation of the Z-score transition proles in terms
of business ‘health’ over the crisis periods, and hence theireconomic resilience, has been enlisted in Table 1, along with the
business description of each case rm. For further details about
the methodology, see Pal et al. (2011).
5. Findings
The results of survey questions, how the rms considered the
signicance or lack of ‘resourcefulness’, ‘dynamic competitiveness’
and ‘learning and culture’ to be important in inuencing their
economic performances during crises are described below.
5.1. ‘ Resourcefulness’ factors and economic resilience
The responding rms considered reliable information support
along with innovative operations and technologies to be the most
essential factors among material/systems resources, affecting their
economic resilience prole during the recent credit crunch. Back
in 1990s crisis, innovation was considered to be an essential
precursor for yielding better economic performance, hence, resi-
lience. The other material assets had moderate inuence in
effecting performance during the crises. However, nancial
resources, mainly in the form of cash ow and liquidity, along
with proper budgetary control and strong nancial reserves were
considered to be the most signicant factors to keep rms buoyant
amidst the recent global crisis, while proving to be moderately
inuential in the 1990s crisis. Brand reputation and goodwill with
the customers, suppliers and bankers were also considered inevi-
table factors inuencing sound business health in such periods.
Social resources (as employees) and relational networks and
partnerships with suppliers and other members in the value chain
were also considered to be moderately important in inuencing
economic performance during the crises.
Inter-rm differences in responses were noticeably observed as
rms 1, 2 and 6 mostly considered resources to be signicantly
important to inuence their economic resilience, particularly in
the recent crisis, while case company 8 was the only rm to reect
on poor correlation between ‘resourcefulness’ and economic
resilience. The rest of the responding rms mostly revealed
moderate to strong relational evidence between the asset/resourcefactors and their economic resilience. However in the 1990s crisis,
only case 6 revealed a strong inuence of resources on resilience
development (cf. Table 2).
5.2. ‘ Dynamic competitiveness’ factors and economic resilience
The second antecedent of resilience is ‘dynamic competitive-
ness’ categorized into long-term exibility (operational and stra-
tegic), redundancy, robust responses and networks along the value
chain. The responding rms considered these ‘dynamic competi-
tiveness’ aspects to be less inuential in affecting their economic
resilience during the two crises periods, except operational and
strategic exibilities, deemed to bear high degree of correlation for
bolstering resilience.Flexible internal processes, and in particular exible decision-
making and customer-centricity were adjudged to be strong
enablers of positive economic performance, hence, resilience in
the recent credit crunch. During the 1990s crisis, the responding
rms still considered market intelligence and customer centricity
to be strong enablers of resilient performances. However, redun-
dancy in terms of parallel processes, multi-channel distributions
and alternate suppliers and strategies were deemed to be poorly
inuencing rms to combat economic disruptions (in both the
crises) and so were value chain networking and investments into
other supply chain members. Intra-organizational collaboration in
decision-making was, however, deemed to be moderately impor-
tant in handling performance measures.
Inter-rm responses showed that most of the companies
exhibited poor to moderate relationships for redundancy and
robustness to foster economic resilience. Particularly case compa-
nies 3-5 and 8 considered dynamic competitiveness to be poor in
inuencing their economic resilience in both crises. However,
Fig. 3. Z-score transition proles (1989–2010).
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companies 1, 2 and 6 rated it to be strongly to moderately
inuential in effecting their economic performances. It was
evident that the rms considered organizational exibility (both
operational and strategic) to be the only inuencing competitive-
ness factor enabling resilient performances in both crises, how-
ever, except rm 8 (cf. Table 2).
5.3. ‘ Learning and cultural’ factors and economic resilience
The third antecedent of resilience highlighted in the research
framework is broadly classied as ‘learning and cultural’ factors
categorized into (i) collectiveness and sense-making, (ii) employee
wellbeing, and (iii) leadership and role of top management.
The responding rms considered valuable and attentive leader-
ship, along with employee wellbeing through higher accountabil-
ity and respect, to be the core of ‘learning and culture’, inuencing
healthy economic performances through resilience amidst crises.
Overall, collectiveness and organizational sense-making were
considered to have strong to moderate inuence on economic
resilience in the recent times, particularly group/team learning
and sense of purpose and trust (among employees). However,
these factors were not considered very inuential in supporting
resilience during the 1990s crisis, except trustworthiness of the
employees.
Inter-rm cases showed similar relationship between ‘learning
and cultural’ factors and economic performances for most of the
companies. Particularly, case companies 2, 3 and 6 considered the
inuence of this aspect on economic resilience to be very high
during the recent crisis, while rms 1, 4 and 7 adjudged it to be
moderately inuencing the rm’s resilience development. Simi-
larly, during the 1990s economic crisis companies 2, 4, 6 and
7 considered ‘learning and cultural’ factors to be strongly to
moderately inuential in dealing with the crisis. On the other
hand, rm 8 consistently reported insignicance of this aspect as
an essential antecedent for fostering better economic perfor-
mances, hence resilience in crisis times (cf. Table 2).
Cross-case analysis of the survey ndings (cf. Table 2) can be
assimilated as follows:
‘Resourcefulness’ was asserted to have a strong degree of
correlation with the ‘Z-score transition prole’ inuencing eco-
nomic resilience in the recent credit crunch, while having
moderate correlation in the 1990s crisis. ‘Dynamic competitive-
ness’ of rms exhibited a moderate to poor correlation with the
‘Z-score transition prole’, thus proving to offer a lesser degree of
causation in bolstering economic resilience. ‘Learning and cultural’
factors exhibited a signicantly strong correlation with the ‘Z-
score transition prole’ of the studied rms amid the economic
crisis of 2007–09 but a moderate degree of correlation in the
1990s crisis.
Table 3 is an outcome of the analyses of Table 2, asserting thedifferential degree of inuence by the antecedents the rms
considered in bolstering their economic resilience, and Table 1,
identifying the business ‘health’ of the rms in terms of their
Z-score transition proles during the crises.
For example, case rm 1 considered all its antecedents to have
signicant correlation in affecting its poor economic resilience
amidst the recent crisis (2007–09), thus, suggesting lack of these
antecedents. While in the 1990s crisis, the rm's lack of economic
resilience could be attributed moderately to the lack of these
antecedents, signifying the effect of other factors as well. While for
case rm 6, its poor economic resilience amidst both the crises
was signicantly correlated to all the antecedents, thus signifying
considerable lack of these factors. The case-wise relationship that
emerged out in the study was as follows:
To have a deepened understanding of these antecedents
favouring or inhibiting resilience development in Swedish
textile-related SMEs, rst a case-wise and then a cross-case
analysis was made of the interviews. Results of the interviews
are reported in appendices 1 and 2 and favor understanding of the
antecedents, the signicance or lack of which subsequently
bolstered or inhibited economic resilience.
5.4. Interview ndings and Z-score transition pro le analysis
Along the process of nding out the emergent pattern among
the antecedents facilitating or inhibiting economic resilience
development, authors have related the interview ndings (cf.
Appendices 1 and 2) to rms' Z-score transition performance.
Firm 1's lack of resilience arose out of cash ow problems and
loss of investments along with effects of currency devaluation
resulting in lower liquidity, leverage and protability ratios,
amidst 1990s crisis. Firm 3's lack of resilience was an outcome of
Table 3
Identifying the degree of relation between economic resilience and its enablers.
Resourcefulness (R) Learning and Culture (LC) Dynamic Competitiveness (DC)
2007–09 1990–93 2007–09 1990–93 2007–09 1990–93
Case 1 (↗) (-) (↗) (-) (↗) (-)
R -−Res R -−Res LC-−Res LC-−Res DC-−Res DC-−Res
Case 2 (↗) (-) (↗) (↗) (↗) (↗)
R -~Res R -þRes LC-~Res LC-þRes DC-~Res DC-þRes
Case 3 (↗) (-) (↗) (-) (↘) (↘)
R -þRes R -−Res LC-þRes LC-−Res DC-þRes DC-−Res
Case 4 (-) (-) (↗) (↗) (-) (↘)
R -þRes R -−Res LC-þRes LC-−Res DC-þRes DC-−Res
Case 5 (-) (-) (-) (-) (↘) (↘)
R -−Res R -−Res LC-−Res LC-−Res DC-−Res DC-−Res
Case 6 (↗) (↗) (↗) (↗) (↗) (↗)
R -−Res R -−Res LC-−Res LC-−Res DC-−Res DC-−Res
Case 7 (-) (-) (↗) (↗) (↗) (-)
R -−Res R -−Res LC-−Res LC-−Res DC-−Res DC-−Res
Case 8 (↘) (↘) (↘) (↘) (↘) (↘)
R -þRes R -−Res LC-þRes LC-−Res DC-þRes DC-−Res
Symbols in parentheses () represent degree of correlation.
↗: Signicant/High correlation, -: Moderate correlation, ↘: Low/Poor correlation.
Symbol in front of ‘Res’ represent resilience of the rm in terms of Z-score transition prole analysis, cf. (Pal et al., 2011).
þ: Signicant/High, ~: Moderate, −: Low/Poor.
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lack of nance and cash ow along with lower manufacturing and
decision-making exibilities resulting primarily in volume and
margin ramp down, forcing a dip in the protability and leverage
ratios as well. Lack of proper market penetration and marketing
strategies further aggravated the sales decrease. For rm 4,
however, the lack of economic resilience was considerably due
to lowering of most of the Z-score components owing to cash ow
and investment problems in the 1990s. Firm 5 showed constrained
cash liquidity and lack of proper networking followed by lack of proper growth strategies which led to lower protability, solvency
and leverage ratios while for rm 6 the declining turnover,
protability and leverage ratios could mostly be attributed to
problems in setting up good relational networks with suppliers,
banks and customers. Lack of operational exibility and structural
changes inherent to the leather goods industry were also critical
reasons behind rm 6's poor Z-score components. On the other
hand, factors critical to lack of resilience in rm 7 was losing of
orders due to price competition, incorrect product positioning and
production knowledge, hence, driving down most of the Z-score
components while for rm 8 the poor protability and leverage
ratios were considerably due to increase in costs of production,
lack of production exibility and other strategic initiatives like lack
of market development and penetration. The only rm (rm 2)
which showed economic resilience in the 1990s crisis maintained
a stable nancial situation and exible production and decision-
making to redene its business model, resulting in a secured and
‘healthy’ Z-score.
Amidst the recent global credit crunch, rm 1 showed poor
protability ratio due to poor sales and lack of nance and asset
management along with lack of exibility in operations resulting in
high nished goods stock. However, rms 2–4 and 8 mainly showed
high solvency ratio and capital-turnover due to good nancial
reserves, good relational networks with suppliers, customer base
and banks along with optimum exibility to keep on making prots
amidst recessionary trends. These rms also followed right market
and product related growth initiatives for optimum diversication
and consolidation. However, rms 5–7s' poor Z-score components
(mainly poor protability and sales-turnover ratios) were consider-
ably because of similar reasons as prominent in the 1990s viz. lack
of nance and cash ow, lack of relational networks and lack of
exibility at all levels. Lack of fast decision-making for adjusting to
the recessionary trends along with the ability to reduce stocks
resulted in huge losses during the crisis. These rms also lacked a
proper product portfolio development and growth strategy
initiatives.
6. Discussion: explanation of evident patterns
Several key patterns are emergent through the data analysis
following the survey and detailed interviews. Within the organi-
zational resilience framework prescribed here, the key enablers or
antecedents have been identied that were considered essential
by the owner-managers of the SMEs in bolstering resilience in
crises. Table 4, herein, simplies these patterns, observed and
analyzed through the matching of the theoretical frame and the
interview empirics, in generating proper explanation to the
correlation outcome of the survey.
6.1. Financial resources: cash ow and investment nance
Cash ow in rms emerged to be of signicant inuence, as
purported by the owner-managers, along with investment nance,
in facilitating or inhibiting resilience at crises in some way or the
other, as also highlighted by Vossen (1998) and Van Gils (2005).
Cash ow constraint arising out of too much borrowing of
foreign currency during the 1990s, followed by the sudden
Swedish currency devaluation in 1992, affected the liquidity ratios
(in rms 1 and 5), while rising costs of production and overheads
also affected cash reserves in many ways (in rm 8). A decrease in
sales turnover due to volume and margin ramp-down and a
decrease in customer base and low price competition in the
1990s also inhibited rms' cash ow affecting the leverage ratios
(in rms 3, 6 and 7). Cash ow problems due to a sudden shift
Table 4
Pattern recognition from case study observations.
Relation Resilience Firms Inference/Reasons*
Resourcefulness (R)
2007–09 ↗, - ↗, - 2–4 Considerable cash ow, investment nance, relational networks and asset management
↗ ↘ 1, 6 Lack of cash ow and investment nance, workforce lay-off
↘ ↗ 8 Insignicant contribution (except good bank relationships)
- ↘ 5, 7 Moderate inuence of lack of relational networks with suppliers and nancing
1990–93 ↗, - ↘ 1–7 except 2 Lack of cash ow and investment nance
↘ ↘ 8 Insignicant contribution (except lack of nancial reserve)
↘ ↗ 2 Other predominant antecedents
Learning and Culture (LC)
2007–09 ↗, - ↗, - 2–4 Good leadership, employee collectiveness (except in 2)
↘ ↗ 8 Insignicant contribution
↗, - ↘ 1, 5–7 Lack of suf cient evidence (except lack of formal leadership observed in 5 and 7)
1990–93 ↗, - ↘ 1–7 except 2 Lack of suf cient evidence (except lack of leadership and employee collectiveness in 3, 5, 7)
↗ ↗ 2 Lack of evidence
↘ ↘ 8 Insignicant contribution
Dynamic Competitiveness (DC)
2007–09 -, ↗ ↗, - 2, 4 Signicant strategic and operational exibilities
↗ ↘ 1, 6–7 Lack of strategic and operational exibilities
↘ ↗ 3, 8 Insignicant contribution (except operational exibility in 8)
↘ ↘ 5 Insignicant contribution
1990–93 ↗, - ↘ 1, 6–7 Main ly l ack of strateg ic an d operati onal exibilities
↘ ↘ 3–5, 8 Insignicant contribution (except lack of strategic exibility)
↗ ↗ 2 Considerable strategic and operational exibilities
Relations: ↗: Signicant/High correlation, -: Moderate correlation, ↘: Low/Poor correlation.
Resilience: ↗: Signicant/High, -: Moderate, ↘: Low/Poor.n
cf. Appendix 1 and 2 for details.
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from supplier's credit to cash payment scheme (in rm 6) or
sudden postponement of installation orders from customers (in
rm 4) were among other reasons.
Along with this, mostly an investment nance constraint is
evident in rms, due to wrong business ventures, bankruptcies of
group subsidiaries or newly made investments in acquisitions and
new product development (NPD), thus limiting their nancial
reserve during quick crisis recovery (evident in rms 1 and 4 as
they suffered from considerable losses in the 1990s crisis, thusshowing decrease in leverage ratios as the crisis recovery process
was nanced by utilizing retained earnings). Such investment
nance problems are aggravated by lack of proper credit support
from banks as highlighted by Sullivan-Taylor and Branicki (2011)
(evident in rms 5 and 6), while good bank support may lead to
better liquidity and leverage ratios (evident in rms 2, 3, 4 and 8).
6.2. Relational networks
Freeman (2004) analyzed how close relationships in working
with the suppliers, customers and marketing partners to get more
order volumes were essential antecedents of resilience develop-
ment. Such a pattern was observable amidst the recent credit
crunch as key antecedents of resilience development (in rms
3 and 4), contributing to the development of capital-turnover ratio.
On the other hand, lack of external support seems a potential
resilience inhibitor, particularly for SMEs (Fassoulsa, 2006). This
considerably increases the supply chain vulnerability during crisis
(as observed in rms 3, 5 and 6 during the 1990s crisis, as they faced
a lot of problems owing to their diminishing supplier and customer
base). The analysis emphasized several factors contributing to the
shrinking supply and customer relational networks of SMEs, as
highlighted by the owner-managers, like ‘consolidation of suppliers
into few large ones’, ‘lack of alternate high-quality suppliers’,
‘restricted customer base due to low-price competition’ etc.
6.3. Material assets
Current asset problems, aggravated by price hikes along with
huge stock lots, due to a sudden decrease in orders, are common
during crisis. Such constraints were evident during the recent
credit crunch (in rms 1, 5, 6 and 7), in terms of excess raw
material stocks or sometimes shortage of supply or huge storage of
nished goods. They were considered to be potential inhibitors of
resilience development, as it compelled the rms to depreciate
their stock values and think of consolidated internal restructuring
for higher ef ciency planning. This considerably affects the prot-
ability, sales-turnover and leverage ratios.
6.4. Strategic exibility
Strategic exibility in terms of decision-making is a critical
aspect in small rms (Vargo and Seville, 2011). Such exiblestrategic planning lay in devising rolling long-term plans to
maintain necessary readiness even during crises and supported
by oligarchic decision-making, unlike most family rms run
through monocratic leadership (Gunasekaran et al., 2011) (evident
in rm 4). Such strategic exibilities are also essential to devise
changes in organizational design/business model by delocalizing
production completely or shifting product core from fashion
clothing to industrial products etc. (as was evident in rm 2 soon
after the 1990s crisis). Vargo and Seville (2011) also highlighted
how the lack of a proper crisis strategic planning, mainly due to
slack resource constraints, was also deemed to be a key inhibitor
to resilient functioning in small rms (evident in rms 5, 6 and 8).
Overall, strategic exibility can be critical for growth aspects in
rms related to capital-turnover increase.
6.5. Operational exibility
Even though Shef (2007) and other authors have emphasized
the role of operational and structural exibility only in case of
large rms for building resilience, it seemed to be quite an
emergent resilience building theme in SMEs as well. The recent
study highlighted the role of structural exibility in determining
the make-buy decisions in case of small manufacturing rms
(evident in rms 2, 4 and 8) for contributing considerably towardsresilience development by increasing protability and cash ow.
Such control over one's own manufacturing pipeline results in
lower lead-time and inventory management advantages as well.
However, lower exibility in inventory management by handling
raw materials or nished goods inventory (evident in rms 1 and
6), lower exibility in manufacturing or make-buy decisions
(evident in rms 3 and 8 – in the 1990s crisis) also resulted in a
lack of resilience by affecting protability and liquidity, in line with
Thun et al. (2011) highlighting the lack of preventive instruments
in SMEs in tackling supply chain risks.
6.6. Continuous improvements
Quality issues maintained through continuous improvement
were a key antecedent to resilience (in rm 2) to cater to the
requirements of its large automotive sector customers. The
responding rm applied ef cient small batch manufacturing to
improve the production ef ciency, reduce lead times and be
suf ciently lean, thus enhance operational agility, also highlighted
by Ismail et al. (2011) and Kumar et al. (2011) as a necessity to
maintain quality criteria for resilience development in case
of SMEs.
6.7. Learning and cultural aspects
The survey emphasized a strong degree of correlation for this
‘soft’ antecedent in bolstering resilience, as also shown by Vargo
and Seville (2011). Even though a majority of the owner-managers,
when questioned for this study, accepted such strong relation-
ships, they could not justify how it could inhibit or facilitate
resilience in economic crises. This vacuum and non-specicity in
justifying the strong inuence to empirically support the extant
research can be attributed to some reasons. Firstly, the owner-
managers considered employee collectiveness, know-how and
well-being to be very much ingrained or obvious in case of small
rms, as also found by Acquaah et al. (2011). So whether in crisis
periods or not, these soft values are considerably high in small
rms and do not directly facilitate economic resilience develop-
ment, unlike in large organizations. A complementary considera-
tion is the degree of informality existing in small rms' visions and
knowledge, which tends to make these learning and cultural
aspects very tacit (Ates and Bititci, 2011). Secondly, such ‘soft’
aspects do not facilitate economic resilience directly. Moreover,authors perceive such learning or cultural aspects to be long-term
in augmenting rm performance and not crisis dependent, where
small rms mostly rely on short-termism. However, some of the
respondent rms (3, 5 and 7) considered lack of ‘cross-functional
training for developing working teams’, ‘silo organizational struc-
ture’, and lack of ‘formal education’ to be inhibiting resilience
development during the crisis of the 90s. The role of leadership
and management decision-making were inuential factors in
facilitating resilience during the recent crunch (evident in rms
3 and 4), in line with ndings by McManus et al. (2008) and Seville
et al. (2006) Firms like those could break-away from the ‘com-
mand and control culture’ (Ates and Bititci, 2011) generally
prevalent in small family rms, and became more entrepreneurial
and open, and showed better economic resilience.
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6.8. Additional factors engendering resilience
The research also surfaced out a set of factors not considered
in the initial survey as antecedent to resilience development. In
fact these factors cannot be clustered as ‘contents’ enabling
resilience but as the process of deploying these ‘contents’/ante-
cedents for developing a constant ‘growth/business continuity’
initiative in the rms. These factors or processes (growth process)
are indicated to be strategic and operational initiatives (Ismailet al., 2011) of a rm in effectively deploying their antecedents, as
also prescribed by Penrose (1959) and Davidsson et al. (2007).
This answers more towards ‘how’ resilience is developed
(through ‘strategic and operational’ process initiatives) rather
than ‘what’ is essential for it (antecedents). This conforms to the
requirement of developing rm initiatives for organic growth
(along the Ansoff matrix: market penetration, market develop-
ment, extending process capability, or market diversication
(Ansoff, 1957)) or inorganic growth (through merger and acquisi-
tions (M&A) or take-overs) or simply survival in crises (business
continuity planning).
In reality the responding rms did not consider having
contingency planning in their rms, as it deviates the rm's
limited resources and assets. Lack of a proper product portfolio
structuring seemed to be a common problem in small rms,
aggravated in the crises when sales-turnover and customer base
decrease, resulting in improper market penetration or product/
capability development strategies (evident in rms 1, 3, 6, 7 and
8 during the 1990s and in rms 5 and 6 during the recent credit
crunch). Most of the owner-managers responded saying, ‘ lack of
proper positioning along the product pyramid’ and ‘low-price
competitions’ to be the key reasons for this. Firms (2, 3 and 4)
able to diversify into new product segments/labels and achieve
cost effectiveness through right make-buy trade-off dealt with
the crisis better.
Market development and diversication strategies through
innovative product launches and additional sales channels to enter
new markets or customer base (evident in rms 2, 3 and 4 in the
recent crisis) are also critical contributors towards economic
resilience.
M&As were indicated by Penrose (1959) to be less observable in
case of small rms owing to their resource constraint, though
volume growth for high-growth rms does lead to such growth
modes as well. Such trends were noticeable in most of the studied
manufacturing rms (1, 2, 3, 4 and 8) through delocalization of
production to be more cost-effective, though rm 1 could not
capitalize on its venture due to some exogenous reasons.
Finally, exogenous factors like ‘foreign exchange uctuation’
and ‘low-price competition’ also emerged as predominant macro-
inhibitors of resilience development in the recent credit crunch,
while ‘SEK devaluation’ and ‘change in basic textile industry
structure from make-to-buy’ were more deliberating factors in
the 1990s crisis.
7. Conclusion: implications and further research
A major conclusion that emanates from this research is how
rms can develop their resilience potential by tuning their
strategic assets and capabilities (available antecedents of resili-
ence). For the Swedish SMEs the key among them are: (a)
investment nance and cash ow, (b) material assets and net-
working, (c) strategic and operational exibility, and (d) attentive
leadership.
These evident patterns are revealed through the discussion
above. Financial reserves and their mobility enhanced invest-
ment opportunities for the resilient responding rms through
suf cient growth perspectives (along product and market
developments), while rms that showed nancial constraints
succumbed to the crises effects, showing bad nancial perfor-
mance. This is supported by close relationships in the value
chain for the resilient responding rms to continue getting
considerable order bookings from the customers and for price
negotiations with suppliers. Such protable inter-organizational
relationships (IOR) also ensured easy access to raw material
assets at competitive price, as discussed above. Next, exibilityin strategic decision-making was evident in resilient rms for
proper crisis strategic planning, complemented by exibility in
manufacturing and distribution to get cost and lead time
advantages over competitors. For the manufacturing rms,
economic resilience through production effectiveness also
demanded proper execution of lean management and contin-
uous improvement (CI) approaches. Overall, the resilient
respondents were able to ef ciently utilize their slack nancial
and material assets through better relational networking,
higher exibility and continuous improvement (CI) to develop
resilient economic performance in crises, steered attentively
through realistic leadership and decision-making.
Practical implications of the research ndings to the business
practitioners are manifold. First, Swedish textile SMEs can have an
understanding of the underlying factors/antecedents and their
differential effects, bolstering resilience for successful performance
amidst crises. Particularly this unfolds great possibility for rms to
devise resilient solutions based on their nancial and material
asset availability, enhanced by higher exibility, continuous
improvement in ef ciency and networking by developing IORs,
for dealing with future economic crises, like the double-dip
recession or Euro-zone crisis.
Second, rms can have a clearer understanding of ‘where’ and
‘how’ to invest to develop their unique response repertoire in crisis
periods, essential for building strategic readiness, and utilize the
slack resources for resilience building (Ismail et al., 2011). This can
eventually have a strong impact on a rm's resilience by addres-
sing a range of crisis-related problems.
From the academic perspective, rst, there is little empirical
research investigating the different effects of various organiza-
tional capabilities, unifying resource-based view, dynamic cap-
abilities and organizational learning to explore their relationship
in crisis situations to support resilience development. This paper
conceptualizes such a framework for validation. Furthermore, it
investigates empirically, in the context of global economic crises,
how resilience development is favoured or inhibited by the
signicance or lack of antecedents, respectively.
However, considering the diversity and inherent complexity in
the topic of resilience for success/survival of rms there are some
limitations of the present study mainly related to: (a) its narrow
economic crisis context for Swedish textile SMEs i.e. lesser
possibility of generalizability over diverse environmental turbu-
lences, as the study was conned to a homogeneous environ-mental context (two economic crises) for a particular sector
(textile and related) and location (Sweden), (b) that the study
mainly highlights the effects of the internal building blocks of
resilience of a rm, while the external inhibitors or facilitators like
globalization or industrial changes and policies are not detailed
separately in the survey part, (c) that the study does not capture
the interactive (or moderated) effects of each antecedent on
economic resilience of the rms, in orchestration with other
antecedents as control variables; (d) that the study only highlights
the ‘contents’ of building resilience rather than the strategic
process of growth or continuity to achieve it. However, the
theoretical framework of the paper is universal for testing and
application in case of any type of environmental turbulence and in
any time-spatiality.
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Table A1
Emergent pattern in the key antecedents during 1990s crisis.
Antecedents Other process initiatives Exogenous factors
Case 1 Inhibitors Lack of ability to hold back declining capacity of
volume and market share due to higher price
pressure due to delocalization of production and
entry of foreign competitors
Lack of dened growth strategies and
adjustments in product pyramidl(i, ii)
SEK devaluationo
Lacked economic
resilience
Resource and asset problems
Escalation of foreign currency loan
amount incurred for infrastructural
and capacity development due to
SEK devaluationa
Heavy loss incurred in the potential
recovery years following crisis (due
to investments in a sister concern)c
Case 2 Facilitators Knowledge of their core assets and strengths in
production to redene business model and
organizational design by delocalizing production
and shifting product core from fashion clothing to
industrial product
Showed some economic
resilience through
W-shaped recovery
Resource and asset
Stable nancial situation of the
family owing to considerable
retained earningsa
Competitiveness
Flexible production and logistics
with near-by manufacturing in
Sweden, Finland and Portugalg
Flexible decision-making related to
the need to change the business
model and organizational designf
Declining customer base and low-price
competition requiring more stringent market
penetration strategiesl(i)
SEK devaluationo (in September 1992)
Case 3 Inhibitors Lacking market penetrationl(i) strategy owing to
stringent low-price competition owing to
outsourcing trends
Lack of marketing skills
Incredible hike in wages and production
cost forcing outsourcing of productionm
Devaluation of currency (SEK)oLacked economic
resilience
Resource and asset problems
Reduced nancial leverage due to
volume and margin ramp-downb
Reduced number of suppliersd
Learning and culture problems
Lack of cross-functional structure,
hence exible manufacturingg, j,k
Lack of long-term shared vision of
the employees instigating more
self-centred silo structure and
mentalityk
Competitiveness problems Challenging strategic decision-
making owing to both volume and
margin related problemsf
Case 4 Inhibitors Devaluation of the Swedish currencyo
Collapse of Soviet Union, the company 's
biggest marketnLacked economic
resilience
Heavy investment incurred in
developing new product (in 1991-
92) reducing cash owc
Bankruptcy of the packaging
division of one of the group's
subsidiaryc
Fairly new acquisition of business
subsidiaries increasing liabilities
without reaping prots initiallyc
Case 5 Inhibitors Lack of dened growth strategies in the rm's
‘developmental ’ stage under new ownershipsurplused by crisis effects
SEK devaluationo considered to be most
inuential in driving the prots andleverage down
Market problems resulting in loss of big
customers and order-volumen
Lacked economicresilience
Resource and asset problems Constrained cash liquidity due to
too much borrowing of foreign
exchangea
Diminishing number of yarn
suppliers in the European marketd
Lack of bank supportd
Learning and culture problems
Lack of experienced and attentive
leadership in the crisis time
considering the change into new
ownership since 1990i
Lack of cross-functional training for
developing working teams and
employees j,k
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Thus certain future research directions are left open. This can be
related to either understanding the process of uti