The Impact of Business Uncertainty on the Performance of Small Enterprises During the Economic Crises in Sri Lanka

Abstract

Small enterprises often regarded as the backbone of economies, are currently confronted with unprecedented challenges due to the uncertain conditions arising from the COVID-19 pandemic and subsequent economic crisis in Sri Lanka. Therefore, the study attempts to assess the impact of uncertainty in the business environment on the business performance of small enterprises in Sri Lanka during the economic crisis. The study is a deductive and explanatory approach in quantitative design. The primary data was collected for a structured questionnaire from 185 owners of small enterprises in Kalutare district, Sri Lanka. The data was analyzed by using Partial Least Square Structural Equation Modelling. The results revealed that demand uncertainty, supply uncertainty, price uncertainty, policy uncertainty, and behavioral uncertainty have negatively affected business performance while technological uncertainty does not have a significant impact on business performance. Thus, the study empirically exposed that the business performance of small enterprises is severely blocked by business uncertainty during the economic crisis. Therefore, small enterprises should plan business activities to make rational business decisions based on reliable information to achieve better business performance by avoiding uncertainty during the economic crisis.