Midsize Companies Going Bankrupt in the COVID Economy

Mid size companies are going bust in the COVID economy and policy makers may want to pay attention to business diversity when developing their policies. Mid-size businesses are important part of economic stability and often anchor communities to the national and global supply chain. Researchers at Haskayne School of Business and Tuck School of Business found that mid size businesses have been declining in recent decades and took a significant nose dive during the Pandemic (Govindarajan, Srivastava & Enache, 2021) .

The researchers believe that one plausible hypothesis is that mid-size businesses are going bust is because they are not large enough to scale virtually and they don't have strong R&D departments that keep them at the forefront of their market. They are in that difficult spot where overhead, field, and opportunity are not matching in a way that help these businesses adapt. Policy changes could help ensure government is focused on creating an environment where small, medium and large businesses can thrive.

It should be noted that many mid-size companies produce things and sell them nationally and internationally making them an important conduit by which large and small businesses conduct commerce. They are often family and partner-owned being integrally tied to their communities. On the cusps of becoming international corporations their decline could also indicate a decline in emerging global companies (Let us wait and see). 

The researchers looked on the UCLA-LoPucki Bankruptcy Research Database (BRD). Very cool site that people can search around and look for different bankruptcy trends and patterns. This is helpful for understanding how COVID has impacted businesses in  various geographic locations. A little search and I was able to see how bankruptcies impacted the economy in different locations and sizes.

"The UCLA-LoPucki Bankruptcy Research Database (BRD) is a data collection, data linking, and data dissemination project of the UCLA School of Law. The BRD's mission is to promote bankruptcy research by making bankruptcy data available to academic researchers throughout the world." UCLA-LoPucki, n.d., para 1).

What the researchers found was that in 2020 the number of annual bankruptcy filings jumped up to a whopping 226% increase over the annual average. That means there are a fairly large group of businesses that were not able to adapt to COVID and did not have the financial resources weather through the period. Short on assets/resources and lack of ability to adapt seem to be a central theme of closure. 

Playing around with the search variables you can see that certain districts and cities are doing better than others. To me, that highlights the idea the economies are based on networks and that building stronger businesses means they must be better connected to their supply chains (on different levels) and should utilize modern virtual technology to "connect" with like minded businesses and their customers.

I'm still working on a cluster theory that hopefully will show how you can attract small business, pack invest them, and rejuvenate places like Delta County. When we develop local SME small batch manufacturing with micro-tourism manufacturing and connect that with the global supply chain great things can happen. Businesses exist within a context of other businesses and developing multiple clusters together can lead to whole new types of industries. No better place to do this then in a place that growth can come from exportation outside its locality (i.e. drawing financial resources/investment in while pushing products out). Its relative isolation with strong under utilized shipping infrastructure and a downtown in need of new ideas makes it a great spot to focus (and invest).

You can also read about how Advanced Industries Power Exports.

Vijay Govindarajan, V., Srivastava, A. & Enache, L. (February 17, 2021). The U.S. Economy Is Leaving Midsize Companies Behind. Harvard Business Review. Retrieved https://hbr.org/2021/02/the-u-s-economy-is-leaving-midsize-companies-behind

LoPucki, Lynn M. “A Window on the World of Big-Case Bankruptcy.” The UCLA-LoPucki Bankruptcy Research Database (BRD), UCLA, lopucki.law.ucla.edu/.