Post-crisis growth: Resource orchestration, innovation, and diversification in MSMEs

Abstract

This study explores how micro, small, and medium-sized enterprises (MSMEs) can improve their performance in the aftermath of a crisis by effectively managing their resources, encouraging innovation, and diversifying their operations. Drawing on Resource Orchestration Theory (ROT), this study employs a mixed-method approach, first conducting interviews with seven business owners to identify key post-crisis strategies, followed by a survey of 352 MSMEs in Indonesia to test these insights using a structural equation model (SEM). The results show that effective resource management is the key to boosting innovation and diversification. Innovation leads to better performance and supports diversification. However, this study finds no empirical support for a direct link between diversification and performance, suggesting that diversification may not always be an optimal strategy for MSMEs in a crisis. This study sheds light on how MSMEs in emerging economies can build resilience and achieve sustainable growth, thereby enriching the literature and offering practical guidance to business owners and policymakers.