Expectations matter: strategies of small businesses under economic sanctions in Russia

Small businesses are a crucial component of any country’s economy and are typically the first to suffer from external shocks. This study aimed to assess Russian small business preferences for various adaptation strategies to the restrictions on product supplies from Europe due to the 2022 sanctions. Creativity of private business is an important (and unexplored) aspect of the Russian economy’s adaptation to sanctions, explaining its robustness. To this end, we conducted a survey of 1,211 small business owners, including two survey experiments that identified preferences for adaptation strategies for the cessation of supplies from Europe. We found strong and significant preferences for proactive strategies (such as substituting supplies and reducing costs) over waiting or exiting. However, preferences for these strategies depend heavily on subjective future outlooks, including expectations of the possibility of resuming partnerships with Europe, and assessments of prospects for successful self-sufficiency and economic recovery.