Previous studies on SMEs’ practices in response to the COVID-19 pandemic and business performance have examined the impact of each practice on business performance separately (Gerald et al., 2020 Guo et al., 2020 Indriastuti & Fuad, 2020 Sobaih et al., 2021). During the early outbreak of the pandemic, authors expected that SMEs’ responses and practices would focus on financial spending reductions (Thorgren & Williams, 2020), digital technology exploitation (Guo et al., 2020 Indriastuti & Fuad, 2020 Papadopoulos et al., 2020), and disaster management (Eggers, 2020). Additionally, SME owners have adopted a number of practices and strategies to confront the ramifications of the crisis (Thorgren & Williams, 2020). SMEs have received some financial support from local and international NGOs and financial institutions during the COVID-19 crisis (Song et al., 2020). Governments have adopted several policies that will mitigate the negative effects of this crisis (Ahmad et al., 2020). To protect this vital sector from collapse due to the COVID-19 crisis, many governmental and nongovernmental organizations (NGOs) have provided various forms of support to SMEs. Therefore, a socioeconomic crisis related to people’s health such as the COVID-19 pandemic can be expected to have dire effects on SMEs because these businesses require strong connections with people, whether they are customers or suppliers (Nugent & Yhee, 2002). Researchers have emphasized that SMEs are often the enterprises most affected by economic crises (Latham, 2009 Robbins & Pearce II, 1993).
This defect can be attributed to a lack of financial resources and the high cost of business capital (Domac & Ferri, 1999) as well as limited administrative and technical capacities (Demirgüç-Kunt et al., 2005).
Published research has indicated that SMEs have failed to withstand the consequences of economic crises (Latham, 2009 Michael & Robbins, 1998). Some businesses have stopped their activities and remained closed since the first months of the outbreak (Bartik et al., 2020). As a result, many SMEs found themselves incapable of dealing with the situation (Ozili, 2020). This problem has coincided with a decrease in consumer spending because of the reduction in consumers’ income and widespread feelings of uncertainty (Gurría, 2020). SMEs have suffered from a shortage of workers and production inputs because of distortions that marred supply chains, which negatively affected their sales (Gurría, 2020 Segal & Gerstel, 2020) and their ability to fulfill their financial obligations and pay employees’ salaries (Robinson & Kengatharan, 2020). The period of closure and movement prevention policies adopted by governments in many countries have greatly affected SMEs, paralyzing their operations, weakening their financial positions, and exposing them to financial risk (Omar et al., 2020 Oyewale et al., 2020). Studies have shown that SMEs are confronted with various difficulties and challenges due to the COVID-19 pandemic. The repercussions of the COVID-19 pandemic have been felt across all economic sectors and institutions, including small and medium enterprises (SMEs) (Hasanat et al., 2020). The conditions and restrictions imposed in most countries to limit the virus’s spread among people, such as social distancing and quarantines, have led to distortions in the system of supply and demand for goods and slowed many countries’ economies. Since its emergence in late 2019, the COVID-19 epidemic has caused negative effects on the economies of countries and has had a disastrous impact on human health. The study has several significant practical implications for SME managers, governments, and policy makers that have been stated. PLS-SEM bootstrap results indicated that external support aids strengthen the positive impact of SMEs’ innovation practices on business survival rather than its performance. The structural equation modeling results showed that the innovation practices adopted by SMEs to face the repercussions of COVID-19 had a positive impact on the performance and likelihood of business survival. Online questionnaire has been used to collect the data from 259 randomly selected SME managers in Saudi Arabia, and the data was analyzed using the SmartPLS3 software. This study aims to develop a theoretical model to provide insights about the association between innovation practices and the SMEs’ performance and survival while underlining the auxiliary role of external support in such a relationship. Global epidemic crises, such as the coronavirus (COVID-19), usually expose small and medium enterprises (SMEs) to various kinds of challenges and may put their lives at risk.
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