Analysis of factors impacting firm performance of MSMEs: lessons learnt from COVID-19

Abstract

PurposeThe micro, small and medium scale enterprises (MSMEs) faced various challenges in the ongoing COVID-19 pandemic, making it challenging to remain competitive and survive in the market. This research develops a model for MSMEs to cope with the current pandemic's operational and supply chain disruptions and similar circumstances.Design/methodology/approachThe exhaustive literature review helped in identifying the constructs, their items and five hypotheses are developed. The responses were collected from the experts working in MSMEs. Total 311 valid responses were received, and the structural equation modeling (SEM) approach was used for testing and validating the proposed model.FindingsCritical constructs identified for the study are-flexibility (FLE), collaboration (COL), risk management culture (RMC) and digitalization (DIG). The statistical analysis indicated that the four latent variables, flexibility, digitalization, risk management culture and collaboration, contribute significantly to the firm performance of MSMEs. Organizational resilience (ORS) mediates the effects of all the four latent variables on firm performance (FP) of MSMEs.Practical implicationsThe current study's findings will be fruitful for the manufacturing MSMEs and other firms in developing countries. It will enable them to identify the practices that significantly help in achieving the firm performance.Originality/valueThe previous researches have not considered the effect of “organizational resilience” on the “firm performance” of MSMEs. This study attempts to fill this gap.