Surviving the recession : insights from SMEs in Malta

Abstract

In 2007, the world went through a drastic economic change. This was the beginning of the 2007/2008 global recession that started in the United States and spread throughout the world, including Malta (Vandenberg, 2009). Malta is a small island state located in the middle of the Mediterranean Sea. It has a small but strong economy mainly based on Small and Medium-sized Enterprises (SMEs). SMEs in Malta were affected by the recession, but not each SME was affected in the same way and to the same extent. Many SMEs took actions to be able to survive the harsh economic climate that developed during the recession. The aim of this study was to explore how SMEs in Malta survived the recession. It explored what actions were taken by SMEs and evaluated whether their entrepreneurial nature enabled them to overcome the challenges brought about by the recession. For the purpose of this study, ‘entrepreneurial nature’ was what “key decision makers use to enact their firm’s organizational purpose, sustain its vision, and create competitive advantage(s)” (Rauch et al., 2009, p. 6). Entrepreneurial Orientation on the other hand is a firm level concept which is still dependant on the entrepreneurial ability of the key decision makers within the company, this was an important factor as to why some SMEs survived the recession. A qualitative research approach was adopted, and semi-structured interviews were conducted with founders and/or management staff of 13 SMEs in Malta. These SMEs were chosen from a variety of different economic sectors and had all survived the recession. The interviews were analysed using thematic analysis to define the common themes and trends. Although no generalizations could be made due to the small sample of this qualitative study, the findings indicate that not all SMEs in Malta were directly affected by the recession’s economic impact. Indeed, all the SMEs in this research sample had survived the recession and are still in operation today, and while some reported struggling through the crisis, others continued to operate as usual even during the recession. Overall, Malta’s SMEs survived the recession by making changes to cut down costs, which is done regularly but is more critical during a recession. A key differentiating factor between the SMEs that were affected and those that were not was the economic sector in which the SME was operating, and the location of its client base. SMEs that operated in sectors that offered staple products (i.e., essential items like bread and milk) were unaffected by the recession. Similarly, SMEs that only had Maltabased clients were hardly affected and could adapt to the economic recession much easier that SMEs that had foreign clients.