How SMEs respond to an exogenous shock: Diversification, servitization and digitalization

COVID-19 has been an exogenous shock for several businesses. Pandemic pushed firms to operate in an uncharted territory. Firms had to adapt quickly to survive in an unpredictable market and in conditions of uncertainty further fueled by political instability and environmental challenges. Based on a quantitative survey carried out during the pandemic period, the study aims at assessing how small and medium-sized enterprises (SMEs) responded to the challenges emerged during the COVID-19 outbreak, focusing on diversification and servitization strategies to outline potential new theoretical insights related to these strategies developed in turbulent times considering the function of digitalization in this respect. Through a cluster analysis the study identifies 4 groups of firms (unresponsive, defender, analyzer and prospector) that have shown different responses to the crisis related to diversification and servitization, highlighting the key role of digital technologies (both ICT and Industry 4.0) as well as of customers. The findings allowed to define theoretical and practical implications.