Micro- and Small-Sized Enterprises’ Sustainability-Oriented Innovation for COVID-19: History
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Contributor:
Weilun Huang
,
Hengbin Yin
,
Seongjin Choi
,
Mohsin Muhammad

The economic impact of a public emergency, such as the COVID-19 pandemic, is often reduced by micro and small businesses (MSEs) undertaking sustainability-oriented innovation for public emergencies (SOIPE), which includes production and service innovation, information innovation, marketing innovation, and labor innovation. The originality of the following content lies in its prediction and evaluation of COVID-19′s challenges and SOIPE’s requirements to have a keen observation and discovery ability. 

  • micro- and small-sized enterprises
  • sustainability-oriented innovation for public emergency

1. Introduction

The COVID-19 pandemic has caused short-term setbacks for many small- and medium-sized enterprises (MSEs) in many countries. MSEs are therefore considering their sustainability post-COVID-19. Therefore, the issue of sustainability should be an essential issue for modern businesses, measured by their corporate social responsibility (CSR) [1]. However, MSEs may care more about economic CSR than social and environmental CSR. The most direct impact of the COVID-19 pandemic is a diminished level of customer demand, which concerns most MSEs [2]. As a result of the economic recession aggravated by the COVID-19 pandemic, MSEs have been negatively impacted [3][4][5]. It has been argued that the economic and financial effects of the COVID-19 pandemic should be described as a negative impact and perceived risk to the environment. MSEs make up 90% of the total number of enterprises in many countries and regions. The economic development mode of MSEs is rapidly changing as they continue to grow on a global scale, as is their employment absorption capacity. Their role has been to propel regional growth and maintain social stability. Apart from providing jobs, MSEs are responsible for most technological and managerial innovations and contribute to the development of the economy [6][7][8].
Existing studies suggest that public emergencies’ sustainability evaluation criteria should include governance sustainability (GS), economic sustainability (ES), financial sustainability (FS), and sociocultural and environmental sustainability (SS) [9][10]. Furthermore, during the COVID-19 pandemic, some MSEs used sustainability-oriented innovation for public emergencies (SOIPE), which comprises production and service innovation (SOIPEPS), information innovation (SOIPEI), marketing innovation (SOIPEM), and labor innovation (SOIPEL). In addition, MSEs incorporate product, process, and marketing innovations to improve their marketing, financial, and production performances [3][11]. Therefore, the MSEs should be able to respond efficiently and effectively to public emergencies through SOIPE, which would lead to improved performance, competitiveness, and risk management [3][12]. In most studies, MSE innovations are not distinguished by type; however, with limited resources, the costs and benefits of a variety of types of innovations should differ, especially in relation to budgetary constraints. Innovation is said to include new technologies, products, processes, services, and management concepts [6].
Several studies have discussed the effects of SOIPEPS, SOIPEI, SOIPEM, and SOIPEL on MSE performance through the key dimensions of GS, ES, FS, and SS. However, fewer studies have focused on the mediating effects of SOIPEPS, SOIPEI, SOIPEM, and SOIPEL, for MSEs, which may improve the causal relationships between public emergencies (e.g., COVID-19 pandemic) and MSE performance in GS, ES, FS, and SS. In addition, fewer studies have examined why MSEs need to innovate to cope with the impact of the environmental volatility of a public emergency, and none have examined how MSEs should choose the best SOIPE to respond to the impact. A company’s product and service innovation can, on the other hand, transform its growth, profitability, and competitiveness [13][14]. In the published literature, production and service innovation play a vital role in responding to volatility in the market, supply chain, and socioeconomic environment; however, such a response might not be appropriate for MSEs [13][15].

2. Micro- and Small-Sized Enterprises’ Sustainability-Oriented Innovation for COVID-19

By considering emergency-impacted MSE capabilities, SOIPE was developed for MSEs. To accomplish this, MSEs can harness the perceived environmental volatility and negative impacts of a public emergency to develop and implement an effective SOIPE. MSEs’ SOIPE is also the first study to include it as a mediator between the perceived negative impact of a public emergency and the environment’s volatility and their ability to perform. MSE performance and perceived negative effects of a public emergency can be better understood, and SOIPE can be explored as a mediating factor. MSEs’ pro-emergency practices are also influenced by a growing number of studies examining the perceived negative impacts and environmental volatility of public emergencies. Through the mediating mechanism of SOIPE, the causal relationships between perceived negative impacts were showed, environmental volatility, and MSE performance. Emergency situations can adversely impact MSE performance, which leads to MSEs adopting sustainability-oriented innovations to alleviate those causal relationships. MSE performance and perceived environmental volatility are only rarely correlated [16][17][18]. To enhance MSE performance and address perceived environmental volatility, a selection mechanism could choose the optimal SOIPE for incremental improvements. Cao et al. (2022) [6] reported that return on assets is a measure of the performance of MSEs.
COVID-19 has primarily impacted MSEs in relation to economic activities, unemployment, trade, supply chains, businesses, and personal networks, as well as cross-border transfers of knowledge, technology capital, ideas, and people. Moreover, long-term effects include secular stagnation caused by precautionary saving or rebuilding depleted wealth, as well as the joint effect of the above negative effects across different regions. According to Achi et al. [3], green innovation processes balance and adjust perceived changes in the environment. In their report, Twahirwa et al. [19] noted that MSEs faced challenges due to the COVID-19 pandemic primarily related to client bills, investment ability, input accessibility, and consumer accessibility. According to the International Trade Centre [10], COVID-19 has shutdown impacts, supply chain disruptions, and demand depressions on MSEs.
Price, demand, and supply chain volatility are increasing more than ever before as a result of this public emergency. Furthermore, customer preferences, technology, and investor risk aversion in domestic and foreign capital markets play a role. It makes it difficult for MSEs to predict profit trends [3][20]. MSEs’ external environment volatility can include unpredictable market demand, unstable production volume, and difficulty monitoring market prices, according to Achi et al. [3]. According to Maldonado-Romo and Aldape-Perez [21], the COVID-19 pandemic could reduce MSE profitability.
Among the perceived advantages of MSEs are production cost-effectiveness, recycling and reusing materials and parts, and the environment-safe disposal of hazardous substances and waste [3][22]. Compared with other SOIPE types, MSEs perceive the disadvantages of SOIPEPS to be higher capitalized costs, longer period, and more uncertainty of market acceptance. In Mexico, Donovan et al. [23] found that most local maize seed MSEs focus on their limited marketing investments, production infrastructure, and business management. Păunescu and Mátyus [24] found that Romanian MSEs coped with the disruption caused by the COVID-19 pandemic through SOIPEPS, which includes production innovation and demand support for customers and communities.
The advantages of SOIPEI perceived by MSEs are that various resources and information can be shared and used quickly, and production and marketing can be improved effectively. MSEs can improve their allocation efficiency for labor, knowledge, management, capital, and technology by improving information efficiency. MSEs could improve allocation distortion by participating in the value distribution of economic chains. Compared with other SOIPE types, MSEs perceived disadvantages of SOIPEI, such as higher costs for information securities, more information personnel, and more training for information and communication skills. Da Costa et al. [25] found that MSEs could optimize process routine performativity through human cognition, which could promote by SOIPEI. Antypenko et al. [26] reported that information support from SOIPEI could help MSE development, considering MSEs’ operating problems in relation to organization, communication, technology, markets, and information. Dierckx and Stroeken [27] posited that cooperation and networking should be the advantages of MSEs’ SOIPEI. Păunescu and Mátyus [24] found that MSEs’ SOIPEI might promote their performance, the targets of which include supply chain stabilization and broadening access to relevant information.
Advantages MSEs perceive for SOIPEM are improved efficiency and reduced costs. MSEs could make full use of the Internet to shorten their value chains or use online social media to establish consumer communities and reverse customize products. MSEs perceive the disadvantages of SOIPEM to be its higher costs for transaction securities, higher trust and search costs for consumers, and higher transaction costs of laws and regulations. Jeong and Chung, Aksoy, Gupta et al., and Naidoo [28][29][30][31] argued that SOIPEM would be improvements in the marketing mix, including products, placement, promotion, or pricing. An MSE’s ability to absorb new processes and technologies should be determined by its market, processes, and marketing innovations, according to Taques et al. [32].
For SOIPEL MSE perceives advantages in its flexible labor allocation, accurate labor cost-control, quick labor efficiency improvement, and effective employment risk-reduction. On the labor side, SOIPEL could help MSEs achieve maximum labor value and diversified development. However, MSEs perceive disadvantages of SOIPEL such as higher committed labor costs, labor adjustment costs, and labor adaptation costs. Bartlett and Morse [33] found that most MSEs have used the labor flexibility from SOIPEL to survive during the COVID-19 pandemic; however, there are higher closure risks from committed labor costs. Păunescu and Mátyus [24] found that SOIPEL might promote MSE performance, including operational management efficiency, worker protection, workplace safety, and working conditions.

This entry is adapted from the peer-reviewed paper 10.3390/su14127521

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