SMEs’ innovation and government support during the COVID-19 pandemic

Abstract

Purpose: There is a need for research examining how governments and firms responded to the coronavirus disease (COVID-19) pandemic. This study investigates the interdependence between governments and innovative small and medium-sized enterprises (SMEs) during the pandemic in relation to the dynamic capabilities and resource dependence theories. Design/methodology/approach: We use World Bank survey data collected immediately before and after the COVID-19 outbreak and a generalized structural equation model to examine the mediating role of government support in the relationship between firm innovation, resilience and survival. Findings: Innovative SMEs exhibited higher resilience and a better chance of survival during the pandemic, partly due to attracting more government support. Originality/value: This study offers a novel understanding of the government’s role in supporting innovative SMEs during the pandemic. The findings have implications for how government support policies can limit the deadweight effect and the substitution effect.