Foreign ownership and business group affiliation strategies of European hospitality SMEs during difficult times: A double-edged sword

Despite the growing recognition in the literature that foreign ownership and business group affiliation (BGA) are rewarding for firms in general and hospitality small and medium-sized enterprises (SMEs) in particular, this issue has not yet been subjected to direct empirical investigation during the 2008 financial crisis and the COVID-19 pandemic. Based on a large, updated sample of 207,691 firm-year observations of 37,881 hospitality SMEs operating in 29 Eurozone countries from 2002 to 2021, this research offers new insights into the strategic management of these firms during times of economic downturn. Our results provide evidence that foreign ownership and BGA size have positive impact on the financial performance of European hospitality SMEs. Furthermore, foreign ownership and BGA moderate the negative effect of both crises on the financial performance. In particular, we found that European hospitality SMEs affiliated with large BG suffered more during the difficult times (COVID-19 pandemic). In addition, foreign-owned SMEs operating within the European Union exhibited lower profitability than their Eurozone counterparts during the crisis periods. These findings contribute to the understanding of SMEs' geographic expansion strategies in the hospitality industry and offer valuable implications for business owners and authorities.