The Role of Dynamic Capabilities, Digital Capabilities and Social Capital on Resilience and Recovery of SMEs during Covid-19 in Sri Lanka

Abstract

The question of why some SMEs failed to withstand the COVID-19 crisis whereas some Sri Lankan SMEs survived remains unanswered. It demonstrated very clearly how frail the economy of Sri Lanka is and raised doubts about the resilience of Sri Lankan businesses. This research investigated the factors affecting resilience of SMEs in Sri Lanka. This research used a conceptual framework comprising of Dynamic Capabilities, Social Capital and Digital Capabilities to analyze the antecedents of resilience of SMEs in Sri Lanka. A randomly selected sample of 76 SMEs in Sri Lanka was analyzed using Partial Least Squares Structured Equation Modelling (PLS-SEM) method. Results indicate Dynamic Capabilities, Social Capital and Digital Capabilities have a significant positive influence on SME resilience. Dynamic Capabilities, Social Capital and Digital Capabilities together explained 29% of the variance in resilience of SMEs. Development of knowledge, both theoretical and empirical, has become critical in order to understand how endured SMEs adapted, managed the crisis, built resilience and ultimately how they recovered from the crisis. Such knowledge will become invaluable in a future crisis situation to protect SMEs of Sri Lanka.