The Relationship between Entrepreneurial Optimism and Business Recovery during the COVID-19 Pandemic

Abstract

Covid-19 created unprecedented challenges for the business sector, which provide a unique way to study what drives the ability of firms to overcome exogenous shocks. Using a large-scale longitudinal survey, we study how entrepreneurial traits shaped entrepreneurs’ actions during a pandemic. Evidence from 1,632 UK firms shows that entrepreneurs who score high on optimism were more likely to innovate and make organizational changes to their firms during the Covid-19 outbreak. Moreover, optimistic entrepreneurs experienced higher revenue growth during the pandemic. Collectively, our study sheds light on the psychological factors explaining why some firms can prosper and some others struggle in the wake of an external shock.