ORGANISATIONAL INNOVATION IN TIMES OF CRISIS: A COVID-19 UPDATE

In 2018, I conducted research on innovation in public sector institutions. In detail, I looked at whether the level of innovativeness was affected by the occurrence of a crisis. As indeed, crises seem to be positively correlated with innovation in public sector institutions. Moreover, the analysis also covered whether this increase was caused by intimidating motives, such as fear of losing legitimacy, or by technical motives, due to the increased need to act effectively. Encouragingly, the work concluded that, due to the increased workload, public institutions need to shape new responses to cope with this workload within a limited timeframe, while their resources remain equal in the short run. In short, the study concludes that crises may trigger improvements in public institutions by creating the need to innovate.

Admittedly, the study had some methodological shortcomings, since it was conducted as a case study. Accordingly, one could not confidently make broad generalisations. The study was limited to one organisation during one crisis. Although the case selection was designed to provide for some higher degree of applicability, a higher number of cases would have made a stronger point. This was, however, not possible due to the complexity of the analysis itself and little prior work in this field.

From a societal perspective, the emergence of the COVID-19 virus and its development into a global pandemic is a great tragedy. From an academic perspective, the pandemic created work for the coming decade. Although mankind experienced pandemics before, this was the first global pandemic which we were able to collect tons of data about. Further, its absolute extent is unprecedented, as well as the far-reaching emergency measures by many states. There are so many interesting dimensions to this disruptive event; from the biological aspect, over economic effects, all the way to psychological and behavioural insights.

This article is concerned with the effects on organisational behaviour. As mentioned earlier, I found in 2018 that crises may lead public institutions to improve their innovativeness, in order to cope with the increased workload. The COVID-19 crisis offers an excellent opportunity to test this thesis once again. While the in-depth test or analysis of the thesis should be subject to rigorous academic research, this article provides a good opportunity to tentatively explore some effects of the crisis.

Though we are currently still experiencing the spreading of the COVID-19 virus, there are already some observations that can be made in terms of organisational innovativeness. First, it is interesting to see that this is a type of crisis that concerned the private sector and the public sector simultaneously; this most commonly happens in wartime. Economic crises (depending on the specifics) hit some sectors significantly harder than others and even government ministries are not equally subject to the effects of this type of crisis. The Syrian humanitarian crisis (which was the crisis analysed in the above-mentioned study) primarily concerned the public sector. COVID-19, on the other hand, affected all sectors at least to some degree and in most cases to a significant degree. Moreover, it is important to mention that this happened within a very short time; while political processes often take years, the responses (if any) were implemented rapidly and often also decisively.

In the private sector, we saw companies introducing home-office systems - most of them for the first time ever! This switch is a major challenge from an organisational, as well as psychological point of view - for large corporations, as well as smaller businesses. As expected, many companies incurred massive losses, but because these losses were anticipated, banks continued giving out loans without increasing interests, which is another innovation. Further, the pandemic led to internal restructuring processes in corporations as well, since the style of working has changed and an increased need for workplace safety emerged. Some businesses needed a complete restructuring of their business models. Restaurants, for example, suddenly needed to quickly implement comprehensive delivery services to make up for the loss of dine-in customers. Certainly, for many businesses the pandemic meant the end for their commercial activity. It would also be very wrong to assess the crisis by juxtaposing the business drop-outs against the amount of innovations that took place; in the end, every crisis is undesired and takes its toll on the economy. Nevertheless, it is interesting to see that the hypothesis that crises may trigger innovativeness seems to hold for the private sector, too - at least superficially.

Jair Bolsonaro, President of Brazil

Turning to the public sector, there was a lot more to manage than losses. Placing travel restrictions, implementing safety measures for public health, calming down masses, continuing regular government business. I am sure that many hours of sleep were sacrificed to cope with all these things at once. Unfortunately, assessing public sector responses to COVID-19 is more difficult than doing the same for the private sector. Corporations have one common main goal, which is profit maximisation. Governments are more heterogeneous than corporations, because they are governed by very different principles - Venezuela is governed completely different, compared to Tajikistan, for example. Accordingly, we see that developments of the pandemic differ from state to state and it is difficult to attribute it to political systems or ideologies. Brazil and Turkey, for example, are similar in that they are developing countries and led by relatively authoritative leaders, Brazil's government downplayed the situation and did not implement sufficient measures to stop the virus from spreading. On the other hand, Turkey was one of the last countries that recorded a COVID-19 case and after the first cases were reported, the government implemented very strict restrictions. Another interesting case are the Netherlands, which are ranked as being one of the most innovative countries in the world (Global Innovation Index), but virtually did not introduce any significant measures to contain the spreading of the virus. The responses in Sweden were very similar to the Dutch, while also being ranked high on the Global Innovation Index. Many countries, however, subsidised businesses in an attempt to support them shouldering the economic burden of the massive losses. Unfortunately, this cannot really be counted as innovative behaviour, since it rather falls under the category of crisis management, which is in place in all countries. Basically, they just released funds that were reserved for crisis situations, regardless of the nature of the crisis.

Concluding, it is difficult to make even a tentative statement on the innovativeness of states during the COVID-19 crisis, due to the heterogeneity of the states. Maybe it would be useful to include variables like quality of healthcare systems or types of crises into the analysis to make better sense of the effects on innovativeness. It may be that states' innovativeness elasticity is dependent on the type of the crisis. In any case, this discussion can be a valuable point of departure for in-depth research on this interesting topic, as it points to puzzling questions.