External shock, stimulus policy and economic resilience of small and micro businesses: evidence from COVID-19 pandemic in China

How resilient are Small and Micro Businesses (SMBs) facing the COVID-19 pandemic? We aim to answer this question using sales data from 35,000 brick-and-mortar SMBs in 353 Chinese cities before, during, and after the lockdown period of COVID-19, and examine the economic resilience of SMBs under the impact of governmental stimulus policies. We found that unlike large business entities, SMBs' post-shock resilience is weak, as sales of SMBs do not recover to pre-shock levels. Resilience of SMBs in towns with unitary or small-scale economic structure is stronger than in larger cities, indicating that stickiness of consumption behaviour significantly influences recovery. In the midterm, resilience of SMBs was stronger where local governments implemented offline consumption stimulus policies and this effect was more salient in larger cities. In the long run, SMBs have not shown resilience, indicating pandemic-driven digital transformation of retailing has lasting effects on offline SMBs. Our empirical findings are helpful for policymakers worldwide 1) to understand economic resilience and recovery paths for SMBs facing external shock, 2) to design targeted stimulus policies to help SMBs survive during crises, and 3) to pay more attention to providing digital transformation infrastructures so SMBs can truly strengthen their sustainability in this new era of digital economy.