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Top1. Introduction
It has been acknowledged that Small and Medium-sized Enterprises (SMEs) are the backbone of economies including the UK SMEs with 0-9 employees made up 99% of businesses (OECDa, 2020), and contributed 51% to UK private sector turnover, and 61% of all employment (Santander, 2018). Driving forces include migrant entrepreneurs as economic mechanisms and key talent pool for SMEs; they form the means for SMEs accessing diverse international markets and customers, securing local resources, sharing knowledge across national boundaries (Cai, Meng, & Chakraborty, 2021; Hajro et al., 2017). SMEs are crucial sources of wealth creation, driving economic trade, creativity, creating great economic and social benefits for the nation, while they have also demonstrated that they are highly adaptive to economic changes, thus, being resilient (Clark, 2020). However, the Covid-19 pandemic reshaped our conceptualisation about organisational capabilities, consequently, challenging our belief in SMEs as more resilient to economic changes than bigger firms such as Multinational Enterprises (MNE).
There is a plethora of research that explains dynamic capabilities, which can drive firms and managers abilities to sense and seize new opportunities; Darwinian evolutionary processes entail organisations to maintain fitness levels (e.g., Levinthal & March, 1981; Peysakhovich & Rand, 2016; Van den Steen, 2019), and how organisational populations evolve (Cunha & Heckman, 2009; Johnson et al., 2013; Nelson & Winter, 1982). However, during the Covid-19 pandemic studies have reported that over 430 million enterprises are at risk of disruption globally, mostly in wholesale and retail trades (Hupkau & Petrongolo, 2020). In coping with the challenging time and difficult social environments, many SMEs revealed very limited absorptive capacity, and seemingly constrained from the benefits of government economic interventions. During these variant states: pandemic-circuit-breakers-endemic, the UK government has offered cash grants to organisations and SMEs that have been affected by lockdowns. Yet, despite the UK’s Self-Employment Support Scheme (SEISS) as a safety net for small businesses in the UK during the Covid-19 pandemic, the number of people running their own businesses dropped by 850,000 during the pandemic (ONS, 2022).
The issue raised, thus far, rests on the critical challenge for business resilience, and paucity of strategies that can help SMEs survive and revive. Despite our knowledge advancement, gaps remain in our understanding of uncertainty, consequently, SME resilience across periods of unstable environments. The mechanisms that can drive the evolutionary fitness in the rapid changes of environments remain under-explored, specifically, in relation to firm survival strategies. Addressing this gap motivates this research to advance knowledge in managing changes and uncertainty, by which we bring a theoretical framework that offers some tentative solutions to SME resilience, in using a Systemic Dynamics Approach (SDA). Our framework (Figure 1) focuses on both institutional policy and business strategy. Within which, first, we provide a crucial review of the UK government Covid-19 response, which is based on four themes of UK government interventions. Secondly, in focusing on SMEs in London and how they dealt with the impact of Covid-19, we critically analyse how the responding policy, in effect, affects SME operations while we offer contextual evidence of SME performance from the UK. Thirdly, we construct and offer a potential strategic framework that is conceptualised based on both theoretical and empirical evidence, for how SME can become revival and resilient.