How do High-Tech Software SMEs in China Manage Risks and Survive in Today’s Complex Environment?

Abstract

Small and medium-sized enterprises (SMEs) are the backbone of the national economy in China. However, the average life expectancy of Chinese SMEs is only 3.7 years with more than half of the SMEs failing to survive beyond their first five years. And in 2020, the outbreak of COVID-19 has further aggravated the pressure among SMEs to survive. As a result of this pandemic, many Chinese SMEs struggled with their risk management approaches. Some had to lay off employees, cut salaries and even suspend operations in exchange for a chance of survival. The ongoing pandemic has raised many questions about the risk management strategies and the resilience of SMEs. Some researchers even questioned the effectiveness of some of these risk-management strategies. There is now a crucial need to understand the importance of effective risk management strategies so as to attain a competitive advantage in an unpredictable market. However, there are very limited studies that shed light on the risk management of Chinese SMEs, especially in the high-tech market and in the complex times of COVID-19. How do successful Chinese SMEs sustain and survive in such competition in the high-tech market? What strategies do they apply to manage risks and how effective are these strategies? How do they respond to changes in the market to retain and drive their organizational sustainability and survival? This paper explores some of these gaps by using case studies of 10 successful SMEs from the Chinese High-tech market. Using interviews with the founder-entrepreneurs from these SMEs, the paper discusses how these SMEs approach different risk management strategies including that of COVID-19. The paper will also explore the crucial role played by the founder-entrepreneurs in the decision-making process of risk management.