Adversity Breeds Innovation: The Essential Role of Necessity-Preneurs in the COVID-19 Era

This book chapter explores the emergence of entrepreneurs during the pandemic, with a particular focus on necessity-driven entrepreneurs and the challenges they face in sustaining their businesses for the longer-term. The COVID-19 outbreak and government-imposed restrictions severely disrupted daily life and economic activity, leading to a surge in startups around the world. People who were comfortable in salaried jobs suddenly found themselves wondering about the source of the next paycheck. This resulted in a spike in startups, as the number of new businesses around the world has significantly surpassed the indicators (Census Bureau, 2021; McKinsey, 2022). The number of applications for starting a business reached an all-time high, with an increase of 95% in the United States, 20% in France, and 14% in Japan. Such a surge in entrepreneurship is being attributed by individuals who explored their interests in a new way and became either accidental entrepreneurs as they turn their passions into professions or necessity-driven entrepreneurs as they are forced to do it against their will as a result of the situation (Álvarez-Sousa, 2019). Accidental entrepreneurs are individuals dissatisfied with their current work situation who strive to find new means of income. This could be their passion in baking cakes and starting a business. On the contrary, necessity-driven entrepreneurs are those who turn to entrepreneurship due to unemployment or financial difficulties. For instance, amidst COVID-19 aviation industry was badly affected (e.g. layoffs). This has caused the affected employees to run a business for survival. However, at the same time, some of the newly formed businesses may not be able to withstand competition or find an application and are likely to quickly go bankrupt. Although some studies have examined the factors contributing to necessity entrepreneurs (Cervelló-Royo et al., 2020; Dencker et al., 2021; Jafari-Sadeghi, 2020), lack of attention has been given to investigate the challenges faced by the necessity entrepreneurs to sustain the business for longer-term. Additionally, most studies have focused on individuals with an intention to be an entrepreneur who are equipped with business skills, which may not be the case for necessity-driven entrepreneurs (Nasiri and Hamelin, 2018; Nikiforou et al., 2019; Smallbone and Welter, 2019). Hessels et al. (2008) indicated that the motive for entrepreneurship has an impact on business survival. Individuals with intention to be an entrepreneur might stay longer in self-employment than necessity entrepreneurs (Elifneh, 2015). The author then argued that entrepreneurs who start their venture voluntarily have more knowledge and/or knowledge of a higher quality than necessity entrepreneurs. These entrepreneurs are likely to have prepared more systematically for their entry into self-employment and are likely to have invested more in the specific human capital necessary to succeed as a business owner. In this chapter, the focal point is on necessity entrepreneurs. By focusing on the unique challenges faced by necessity-driven entrepreneurs, we review the factors that contributed to the rise of necessity entrepreneurs and the challenges faced. We then closed the book chapter by providing recommendations into how these entrepreneurs can be supported in the longer-term.