Factors influencing the resilience of mses to the covid-19 pandemic crisis in indonesia

Abstract

The purpose of this empirical study is to investigate two things: a) the impact of domestic economic activities falling sharply due to the COVID-19 pandemic on micro and small industries (MSIs) throughout 2020, and (b) the forms of crisis mitigation measures (CMMs) adopted by crisis-affected MSIs. The study evaluates the importance of four components, namely capital, collaboration, cooperation, and digital technology (DT), using data from the Quarterly MSI Survey (QMSIS) 2020, which included 24,000 respondents (owners of MSIs) from around the country. It provides two key findings: (1) The most popular form of CMMs adopted by crisis-affected MSIs was those that produce other goods whose demand remains high during the pandemic, and (2) The most popular form of CMMs adopted by crisis-affected MSIs was those that produce other goods whose demand remains high during the pandemic with a positive regression coefficient according to theory and significant, suggesting that it was an important determinant of MSIs’ resilience. Combined with online sales, this form of CMM has greatly helped many MSIs survive the crisis. The findings have practical implications, including that government stimulus policy during a crisis must complement and correspond with the CMMs adopted by the target MSMEs, therefore, different forms of CMMs in response to different business risks need different policy approaches and stimulus packages. At least in Indonesia, this is the first attempt to empirically examine the impact of the economic crisis due to the COVID-19 on MSIs and explore their CMM by analyzing data from a national survey. In its originality, the findings of this study add to the small business literature, especially studies on the impact of the economic crisis on business.