Publication

SMEs under uncertainty: What evidence tells us about policy shocks and firm performance

Published: 28 August 2025

SOTA Review No 66

Associated Themes

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  Business Growth
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  Productivity and performance

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Uncertainty is a central and unavoidable element in economics, business, and management. It shapes decision-making, strategy, and organisational behaviour, influencing everything from investment to policy response. While large firms may delay or hedge against risk, SMEs often make irreversible decisions under incomplete information. Investment, hiring, pricing, and innovation strategies may be postponed, redirected, or abandoned. Despite this acute exposure, most empirical studies focus on large firms or treat uncertainty as a homogeneous, external shock. The experiences and adaptive responses of SMEs remain underexplored.

This review asks: What do we know about how policy uncertainty affects organisational decision-making and performance? How do firms, particularly SMEs, interpret and respond to different types of uncertainty? Under what conditions does uncertainty constrain growth or trigger strategic adaptation? We address these questions by mapping the conceptual, theoretical, and empirical landscape of research on policy uncertainty.

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