Sustaining SME agility through knowledge coupling, business process digitization, and innovation during crisis

SMEs faced a paradoxical state due to Covid-19. They must layoff to cover costs and doing so challenges their survival owing to loss of knowledgeable workforce. We empirically develop a strategy allowing SMEs to retain their innovation and agility besides downsizing. Analyses of 306 Chinese manufacturing SMEs indicate that innovation positively mediates between knowledge coupling (business process digitization) and market capitalizing agility (MCA) during downsizing. In no-downsizing sample knowledge coupling leads to innovation (MCA), also innovation leads to MCA; whereas, BPD does not contribute to innovation and MCA. This study is among the earliest empirical examinations to establish agility in Chinese SMEs through mediation of innovation and moderation of downsizing.