• Faculty & Research

    Knowledge creation on China, from proven China experts.

    386
  • Faculty & Research

    Knowledge creation on China, from proven China experts.

    386
  • Faculty & Research

    Knowledge creation on China, from proven China experts.

    386
Wednesday, March 18, 2020

Social capital is critical to tackling COVID-19

By Shameen Prashantham

The COVID-19 virus has caused serious disruption to business around the globe. As such, it is important to ask a number of questions about how best to tackle these challenges and what they may mean for the long term.

How can an organisation’s social capital help boost resilience and speed up a return to business normality at a critical time such at this?

Social capital – both intra-organisational and inter-organisational – is critical for fostering resilience. While we draw upon inner reserves of strength in a crisis, we also draw strength from our network of relationships. For example, goodwill from suppliers and customers can help cushion the blow for many companies facing distress. And within the organisation, keeping up morale and ensuring that progress doesn’t grind to a standstill will be more likely to happen when there is already a sense of camaraderie within the organisation.

Is the current situation something business leadership could never really adequately prepare for and how should leaders guide their firms though this crisis?

In terms of the specifics of the situation, it’s hard to see how anyone could have seen this coming. However, at a more abstract level, being prepared for unexpected external shocks is an important responsibility of business leadership. Over a decade ago, the financial crisis stemming from irresponsible sub-prime lending in the west spread like an unstoppable “virus” causing great distress to individuals and businesses well beyond the epicentre of that crisis.

Back then, many business leaders were caught unawares. Again, the specifics of a crisis are hard to predict. But an overall latent alertness to the need to deal with the prospect that sometimes bad things happen is important, and leadership has the greatest responsibility for this.

How will the virus affect synergies between small and large firms and are there any challenges which large firms face which small ones do not?

In theory, large companies will want to accelerate the development of digital capabilities. Small companies with advanced digital technologies should be able to have an even more mutually beneficial relationship with large companies. But this is likely to be the case where there are already existing collaborations between large and small companies.

Is there potential for a silver lining to come out of the virus outbreak?

I think many companies have been forced to lean on digital technologies in a big way at this time when face-to-face gatherings have been curtailed. By being forced out of their comfort zone to embrace such technologies some companies may well find that their process of digital capability development has been accelerated. That could well prove to be one of the enduring legacies of this crisis.

What will the medium- and long-term impact of the virus be on Chinese business as a whole?

Things remain in flux and the situation is a hugely challenging one but overall, while in the short term obviously many businesses and individuals will experience a fair bit of pain. In the medium term, I think organisations that have demonstrated agility, resilience and adeptness at digitalisation will be able to weather the storm. I am hopeful that the long term effect of the virus will not be huge.

How will the virus impact business relations between China and the rest of the world?

I am observing different types of reaction from those who understand China well and those who don’t. Informed thinking has always been important when dealing with a different cultural context, and this is all the more important when there has been a crisis like the current one. I won’t be surprised if some organisations and individuals think twice about engaging deeply with China in the short run.

However, in my view, China is too integral to the global economy to be completely ignored. And the Chinese government and its people have demonstrated a strong intent to overcome the current situation. In the end they will come out stronger for having gone through this. And there will be an even more important role for “bridges” between China and the outside world, such as CEIBS, to help smoothen cross-cultural dealings in the aftermath of a situation like the present one.

Shameen Prashantham is Associate Professor of International Business and Strategy at CEIBS. Learn more about his research and teaching interests on his faculty profile.