COVID‐19 Pandemic: The Interplay Between Firm Disruption and Managerial Attention Focus

Abstract

Pandemics and epidemics occur regularly, yet their impact on firm behaviours is under-researched. COVID-19 provides a unique opportunity to examine the impact of a once-in-a-century pandemic – given its scope, swift spread, health and economic devastation – on firms’ behaviours. Attention is the critical and initial step of the environmental adaptation process. In this paper, we draw on two complementary theories – contingency and attention-based view – and examine the relationship between disruption experienced by firms and their COVID-19 attention focus – a sudden exogenous shock. Industry environments may influence which signals attract managerial attention; hence, we examine if firm disruption–COVID-19 attention focus is moderated by industry dynamism. Drawing on the publicly available data and using a sample of 1,861 US and 1,154 Chinese firms – two diametrically opposite situational contexts – we test the generalizability of our hypotheses. We find a positive relationship between firm disruption and COVID-19 attention focus for the US sample and that industry dynamism negatively moderates this relationship. In the case of Chinese firms, these relationships were insignificant. Further analysis using topic modelling revealed that business–government relationships accounted for this difference.