Question

Keywords: Covid-19 Globalization International Business Risk Trade Uncertainty

2. Theoretical background and conceptual framework 2.1. Uncertainty – Definition and dimensions Past research identifies different types of uncertainty based on its source (environmental, industry or firm characteristics) or its nature (exogenous vs. endogenous) in the international business context (Certo, Connelly, & Tihanyi, 2008). However, there is still no consensus on the distinction among different dimensions of uncertainty and as a result, these are often used inconsistently or interchangeably, which in turn may hamper the decision-making by international business managers facing uncertainty, by providing an incomplete picture of the role played by uncertainty in international business context (Sniazhko, 2019). A lack of clear distinction among different dimensions of uncertainty may also lead to risky decisions due to misplaced perceptions about the prevailing environment (Brouthers, 1995). A consensus on the exact definition of uncertainty remains elusive, with arguments revolving around whether it is an objective description of an firm’s environment (Milliken, 1987) or the subjective perception of an individual manager or decision-maker about the uncertainty in the environment (Michel, 2007; Milliken, 1987). While the former suggests a universal view of uncertainty, the latter implies uncertainty lies “in the eye of the beholder” (Milliken, 1987; p. 134). To add to the confusion, researchers describe uncertainty in terms of ambiguity, complexity, conflict, entropy, equivocality, risk, and turbulence (Alpers, 2019). Milliken (1987; p. 136) defines uncertainty as a “perceived inability to predict something accurately” resulting from a lack of confidence in one’s knowledge in a situation. From that perspective, uncertainty can be considered to be an overarching environmental variable that influences a business or the economy as a whole, rather than a level of ambiguity, complexity or risk involved in a single problem or decision-making context (Alpers, 2019). This depiction of uncertainty as an overarching environmental variable is particularly relevant to the current crisis as uncertainty due to its widespread and almost instantaneous impact across different countries and markets has made it difficult to predict and control by any single business as it has affected entire international business ecosystems within and across nations. Past research also identifies several dimensions of uncertainty, namely environmental uncertainty that includes political, economic, government, cultural and discontinuous uncertainty, and represents both formal and informal parts of a country’s environment (Sniazhko, 2019). As is evident by the rapid global spread of Covid-19, the nature and level of uncertainty is potentially amplified due to the potential disconnect that each of these elements may have across different national boundaries. Similarly, industry uncertainty includes input, demand, competition and technological uncertainty, whereas firm uncertainty relates to behavioral, R&D, operating and previous experience uncertainty. The cross-national differences in these two types of uncertainties, coupled with the inconsistencies in the way uncertainty is conceptualized and operationalized (Sniazhko, 2019), fail to provide a complete picture of the impact of uncertainty on international business performance. At first glance, discontinuous uncertainty may seem to best describe the uncertainty associated with the Covid-19 pandemic, because its impact is quite similar to that of a natural disaster that result in widespread human and economic casualties (Oetzel & Oh, 2014). However, P. Sharma, et al. Journal of Business Research 116 (2020) 188–192 189 viewing it through this single lens may be problematic because of its cascading effect on other types of uncertainty, such as environmental, political, industry, and firm uncertainties, as highlighted by the way most countries across the world did not consider Covid-19 to be a serious threat when it was mainly concentrated in China and neighboring countries. In fact, they seemed to be only concerned about the continuity of supply chains to ensure the availability of manufactured goods from China, while they waited for further instructions from WHO about the impending disaster, which may have resulted in a great deal of political uncertainty (Gray, 2020). However, as the virus spread across the globe, its impact on the governments, public institutions, industries and individual firms became more apparent, with most nations coming to a stand-still due to the lock-downs and closing of borders, which led to industry and firm level uncertainty. Hence, one major learnings from this experience for international business managers and policy-makers is to consider all the dimensions of uncertainty simultaneously or in sequence, to ensure a more unified approach to dealing with such global disasters in future. 2.2. Uncertainty assessment Previous studies also examine how contextual (e.g. firm, industry, and national) factors influence managerial perceptions of uncertainty (Bouquet, Morrison, & Birkinshaw, 2009; Santos-Álvarez & GarcíaMerino, 2010). For example, larger and older firms tend to have more resources that may help reduce the perceived risk due to an uncertain environment (Acedo & Jones, 2007; Liesch, Welch, & Buckley, 2011), while family firms perceive greater risk than non-family firms (Claver, Rienda, & Quer, 2008). Others show systematic variation in risk perceptions across nations due to differences in their formal and informal institutional structures (Makhija & Stewart, 2002), which affect the nature and availability of information for decision-makers and the consequences of their decisions (Delerue & Simon, 2009). The Covid-19 crisis provides mixed evidence to these ideas as we can see even larger and older businesses like airlines and retailers coming under tremendous pressure and being forced to furlough or layoff a large number of employees, just as smaller businesses like cafes and restaurants. Similarly, developed nations in Europe and North America lead the number of diagnosed cases and deaths due to Covid19, which suggests either a complete failure of their public health systems (e.g., in Italy and Spain) or a lack of political leadership (e.g., in UK and USA). By contrast, countries like South Korea, Australia, and New Zealand have managed to flatten the infection curve with minimal disruption, due to a combination of excellent public health systems and responsible political leadership, while Singapore has seen a second wave of cases despite its early success (Ang, 2020). Interestingly, China seems to have almost controlled further spread of Covid-19, while India has so far managed to keep the number of cases and death quite low relative to its huge population (Srivastav, 2020). However, it is still early to see how countries in the rest of Asia, Africa and Latin America handle this ongoing crisis. 2.3. Uncertainty – Antecedents and outcomes Current literature focuses on the factors that influence the choice of a particular approach to manage uncertainty (e.g., the role of decisionmakers) but pays less attention to the antecedents and outcomes of the different types of uncertainty and/or the outcomes of international business firms strategies used to manage uncertainty. As a result, there is a limited understanding of the impact of uncertainty in the international business environment, and in particular, how it may influence the performance of different businesses based on their unique conditions. For example, one of the main challenges in international business is the assessment of the impact of uncertainty when the risks are interconnected and asymmetric (Bekaert, Harvey, Lundblad, and Siegel, 2014; Buckley, Chen, Clegg, & Voss, 2016), including macro risks that affect most firms and micro risks that only impact a few firms – contingent upon their origin (Eduardsen & Marinova, 2020). Most small firms do not even attempt to assess some types of uncertainty (e.g., political and economic) as these may not affect them directly and/or due to the unstructured and subjective nature of their assessment methods (Oetzel, 2005). Moreover, they may rely on the managers’ own judgment and expert opinion that could be biased and subjective (Eduardsen & Marinova, 2020), as exhibited by the inability of the governments in many countries to anticipate and control the spread of Covid-19 despite having proper pandemic plans in place for many years. For example, public health managers and political leaders have launched programs and initiatives after every major health crisis in the US in the last two decades but most of these “programs were defunded, staff was allowed to depart and Washington forgot the stark lessons it had just learned” (Diamond, 2020). The Covid-19 crisis further demonstrates these issues in quite a dramatic manner, wherein many small businesses around the world have simply collapsed due to the lack of demand from their regular customers and an inability to pivot to alternate ways of doing business. Of course, there are exceptions, such as restaurants switching over to a take-away model instead of dine-in option, fast food franchisees selling bread and milk through their drive-thru counters, and rideshare operators such as Ola and Uber taking up mail and package delivery as their traditional passenger business has almost dried up (cites). Of course, there are implications in such actions that may further increase uncertainty. For example, UberEats has been in battle with food retailers in Australia over delivery fee structures but the company is reportedly not only digging its heels in but is seemingly reluctant to be more flexible in adjusting their fee structures in the current Covid-19 environment (Durkin, 2020). The core uncertainty here is whether this action is signaling power play for channel control or simply a business taking advantage of the uncertain environment by acting opportunistically. Going forward, we would need to look at how these businesses can better prepare themselves so that they can become not only more resilient to overcome the uncertainty imposed by unexpected events but also be more agile to cope with these challenges by being flexible and innovative. 2.4. Uncertainty management Managing uncertainty involves strategies that help firms either reduce (risk management) or cope with (strategic management) uncertainty; reducing uncertainty is a natural motivator that guides firms’ behavior, whereas coping with it allows firms to adapt their strategy to deal with the type of uncertainty faced by them (Sniazhko, 2019). Uncertainty reduction involves information gathering, proactive collaboration or cooperation, and networking; whereas, uncertainty coping consists of flexibility (diversification and operational adaptation), imitation (copy competitors and early movers), reactive collaboration and/ or cooperation, control and avoidance (Simangunsong, Hendry, & Stevenson, 2012). For instance, many food retailers in the United Kingdom (Co-op, Waitrose, etc.) have been forced to reduce their offers on shelves and to focus on delivering the most essential products, to reduce the operational pressure and give more time to retailers’ employees to prepare shelves, clean stores and respond to abnormal customer demand during the lockdown due to Covid-19. More employees were also deployed to increase cleaning across all operations. To reassure customers safety concerns, retailers have offered free hand washing to customers, implemented social distancing with limiting number of customers in outlets, and limiting contact at pay points with installing the protective screens across stores and increasing the card contactless limit to £45. During times like these, reactive collaboration and/or cooperation (e.g., shifting the risk and uncertainty to the firms’ partners) is the most common strategy used by firms to handle environmental or industry uncertainty. Firms may also try to avoid uncertainty when the level of P. Sharma, et al. Journal of Business Research 116 (2020) 188–192 190 environmental and industry uncertainties is much greater than their worst expectations. Overall, managing uncertainty involves reducing the probability of undesirable outcomes and their impact on the businesses at various stages of the value chain (Figueira-de-Lemos & Hadjikhani, 2014). For instance, Aldens is family owned butcher SME, based in Oxford and established in 1783, supplies universities, restaurants, pubs, etc., and they faced an 85% reduction in orders overnight (Midcounties, 2020). Aldens partnered with regional Midcounties Coop retailer to supply fresh meet and substitute those product lines that were in jeopardy because of increased consumer demand and disrupted supply chains. Similarly, many SMEs in fashion industry have started making face masks and lab coats, to meet the insatiable demand for these personal protective equipment (PPE). Similarly, many alcohol factories are now producing hand sanitisers, while a small firm (Isinnova) was able create a system to use the Decathlon diving Mask as a pulmonary ventilator (Murdock, 2020). In this context, it may also be useful to see the experience of Samsung, a South Korean giant in consumer electronics and home appliances, during the ongoing Covid-19 crisis. Being fully aware of the risks of single sourcing, Samsung has established a vast manufacturing network over the years with factories in Brazil, India, Indonesia, South Korea, and Vietnam, to fulfill its huge production demand and to reduce its dependence on China. Unsurprisingly, this has helped Samsung shift its production from one location to another during the ongoing Covid19 crisis, thereby facing just a slow-down, and not a complete shutdown in production. Similarly, to compensate for the closure of retail stores, Samsung has leveraged its contracts with mobile phone retailers and Benow (a payment and EMI technology firm) to create an e-commerce platform so that its retail business can continue to sell and deliver the products to its customers (Mukherjee, 2020). Samsung has also launched additional services to maintain its customer relationships, such as “Free Repairs for the Frontline” program to offer free smartphone repair services to healthcare workers and special discounts for first responders and healthcare professionals (Mihai, 2020).

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