Values Creation and Sustainable SMEs Operational Resilience in the

New Normal: Empirical Evidence from Nigeria

1ALAKE O.R, 2ADEGBUYI O.A, 3BABAJIDE A.A

1,2Department of Business Management,

3Department of Banking and Finance

Covenant University, Ota, Ogun State,

NIGERIA

Abstract: - This study investigated the relationships between value creation and sustainable SMEs

operational resilience in Nigeria. The study adopted a cross-sectional research design. Four hundred

and twenty (420) SMEs operators were recruited for the study using purposive and convenient

sampling methods. Smart PLS (3.0) was adopted as a statistical tool for the analysis. The findings

revealed that value creation had a considerable influence on sustainable SMEs operational resilience.

This study contributes to the existing knowledge on the established business models and SMEs’

resilience in a developing economy like Nigeria. This study recommends that the owners of SMEs

should be flexible and constantly review their business models in line with the new trend in the

business world to create values for the existing and potential customers. The study concludes that

value creation contributes significantly to Nigeria's sustainable SMEs operational resilience.

Key-Words: - Value creation, sustainability, business innovation, operational resilience, SMEs

Received: October 29, 2021. Revised: August 7, 2022. Accepted: September 13, 2022. Published: October 10, 2022.

1 Introduction

In today's competitive business environment,

sustainable SMEs resilience plays a significant role

in the survival of businesses, particularly during the

turbulent business environment as necessitated by

the outbreak of the COVID-19 pandemic. Most

SMEs are still struggling and yet to come out of the

effect of a pandemic. Some businesses that survived

the pandemic's heat could be due to their operational

resilience and the sustainable value that has been

generated by such SMEs.

The literature has established that entrepreneurs

with a high resilience tend to sustainable business

growth [1]. This suggests that operational resilience

has predictive validity to running a successful

business that grows over time. Also, [2] found out

that an SME’s resilience significantly impacts

resourceful behaviours, influenced by the leader's

dedication to the company's success. [3]

characterized a small and medium-sized business as

one that has an average revenue of less than four

hundred thousand naira (N400, 000) and employs

between 5 to 100 people for its operation. The

business behaviours that a leader engages in are

influenced by whether they are driven by ethical

convictions or obligations based on their identity

with their enterprise. According to [4], SME

operational resilience is linked to the leader's ability

to pick and implement a variety of solutions based

on the environment and conditions they face. While

sticking to one strategy in a stable environment

might reduce risk, in a tumultuous environment,

being adaptable and adjusting the strategy gives the

business the best chance of survival. On the other

hand, [5] found that strategies' flexibility and

adaptability are central to SMEs' resilience,

particularly during the economic downturn. The

authors pointed out that there is no such thing as a

"one-size-fits-all" solution, and that some tactics are

only effective when combined with other methods

and initiatives.

Other authors have also investigated the subject

of SMEs resilience. For instance, Small businesses'

resilience is attributed by [6] to their executives'

predisposition to adapt to adverse economic

circumstances by pursuing higher risk methods like

product innovation rather than the more practical

retrenchment approaches. [7] point to the influence

of the leader's social capital and social skills in

influencing the success of entrepreneurial

businesses. The actual and potential resources that

individuals gain through knowing others, being a

member of a social network with them, or simply

being acknowledged by them and having a good

reputation are referred to as social capital and it is

underpinned by social skills, including the ability to

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read others, and to impress and influence them.

Also, [8] Entrepreneurs have been found to have

higher degrees of resilience than the overall

population. At the individual level, resilience is a

determinant of future success. This was also

supported by [9], who posited that resilience is a

process that occurs in some individuals rather than a

trait present in them. [10] also noted that a tendency

for prior experience of shocks in business owners

increases the likelihood of SMEs resilience. None of

these studies focused on the relationships between

values creation and sustainable SMEs operational

resilience in the new normal. This suggests a

research lacuna that this study tried to fill. To this

end, this study explores the relationships between

value creation and sustainable SMEs operational

resilience in the new normal.

2 Literature Review

2.1 Value Creation

[11] defines value creation as engaging in business

processes to offer customers with what they

perceive to be useful while ensuring that the cost of

delivering the advantages does not outweigh the

benefits— it's all about economic impacts.

Customers can gain benefits from a product's

qualities (performance, quality, aesthetics,

durability, ease of use), the product's or firm's brand,

the product's or firm's location, the network effects

associated with the product, or the product's or

firm's service. As a result, the process of

developing, manufacturing, and testing a product all

provide value because they all contribute to the

product's attributes. The value created is the

difference between the benefits that customers

perceive and the cost of providing the benefits. A

company's advert is considered value addition when

the customer's perception of the product is improved

upon. When a product is distributed, it brings it

closer to customers who would not otherwise have

access to it. Value creation for items with network

effects is defined as efforts that add more customers.

The more people who use the product, the more

valuable it becomes to each user. Producer and

product transaction costs: Managers might look for

new technical options to cut costs and provide value

over time. They can also come up with solutions to

reduce the costs of doing business with clients and

suppliers. Personal computers, for example, were

relatively expensive to manufacture when they were

initially introduced. Companies learned to lower

these production costs over time. As a result, the

total value created within this industry has expanded

significantly, as has the number of personal

computers sold in the market. This cut across

consumer transaction costs, new products, and

services, converting organizational knowledge into

value and opportunities to create value.

2.2 SME Entrepreneurs Resilience and the

COVID-19 Pandemic

SME Entrepreneurs examine how COVID-19 will

affect their business and how a business crisis will

affect them. Several competitive characteristics,

such as scenario planning, stakeholder analysis,

development plans, and external and internal

communication, must be considered in order to take

appropriate action. Several indicators can be used to

assess its resiliency, comprehend the impact of

digital change, and determine whether it can

mitigate the negative consequences of the COVID-

19 problem. SMEs must design their business model

after completing external and internal evaluations.

Digital transformation is a process of revamping all

business models and introducing new technologies

for existing activity. The business model canvas is

logic for organizations to create, distribute, and

catch value [12]. Economic growth is related

primarily to earnings imbalance, which is typically

caused by the boom in the "FIRE" economy. SDG 8

promotes sustainable and prosperous economic

growth, optimal and practical opportunities, and fair

jobs for all, while SDG 10 focuses on reducing

income inequality as it affects economic growth:

finance, insurance and real estate sectors of the

economy [13].

To reach corporate goals and to build SME products

or services that are more competitive, the correct

digitalization strategy is required. Cultural diversity,

pluralism, and social motivation are all linked to

competitive advantage. Digital transformation

necessitates thorough testing of digital

infrastructure. The following are the stages that need

to be performed in a SME's digital transformation:

1) Developing the correct mentality and common

understanding; 2) Identifying exceptional

leadership; 3) Establishing a superb digital business

center; 4) Formulating a digital strategy; 5)

Learning, developing, and gaining expertise; 6)

Developing new digital capabilities [14]. With the

proper technology for system resilience, a business

can carry out its digital transformation and create

digital resilience.

2.3 Value Creation and SMEs Resilience

[15] When confronted with disruptive business

model changes, incumbent companies must choose

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whether to react with inaction, resistance, adoption,

or resilience. We concentrate on small incumbent

firm managers' robust reactions to simultaneous

perceived threats and opportunities. We suggest that

risk experiences moderate perceptions of

opportunity, whereas perceived urgency moderates

scenario threat, using cognitive framing arguments.

We put our approach to the test in the real estate

brokerage industry, where modest incumbents are

up against disruptive business model developments

like bargain brokers.

Resilience is becoming a more essential idea in

today's socioeconomic landscapes, according to

[16]. This trend is particularly visible in small and

medium-sized businesses due to the competitive

global environment in which we live (SMEs). These

businesses are vulnerable to unfavorable

circumstances that jeopardize their stability,

profitability, and growth due to their limited

resources and competencies (i.e., their resilience).

Identifying the causes of SME resilience, as well as

their separate cause-and-effect interactions, is

critical because the resilience of these businesses

encompasses a wide range of conceptual or

theoretical challenges that need to be better

understood. The building of an imprecise cognitive

map as a unique technique to analyze the causes of

SME resilience is proposed in this study. The

intuitionistic cognitive map was created using

information gleaned from two rigorous group

meetings with a group of SME managers and

entrepreneurs. The determinants that need to be

examined in this study setting are contained in the

well informed, process oriented framework that

results. The stationary and non - stationary analyses

resulted in a greater knowledge of the cause-and-

effect links between determinants of SME

resilience, allowing managers to plan more

strategically.

[17] investigated how small and medium companies

(SME) deal with the threat and reality of extreme

disasters in order to fill a vacuum in organizational

resilience research. The management narrative of

extreme occurrences differed, depending on

numerous organizational characteristics, according

to a pilot study. This discovery prompted further

research into the concept of resilience's context. The

traditional focus of empirical research and thought

in this area has been large organizations. Despite

this, the heterogeneous SME sector accounts for

nearly all industry and operates in a constant state of

flux. SME participants exhibited a distinct

viewpoint and approach to resilience when

compared to participants from bigger businesses,

according to a comparative study studying UK

organizational resilience. A subset of data from 11

SME decision-makers is presented in this paper. The

association between resilience capabilities like

flexibility and adaptation and organizational scale is

investigated. The findings point to the difficulties of

using a one-size-fits-all organizational resilience

strategy (managerial or policy). This research will

be used to conduct a survey to see how much

resilience is an organizationally conditioned notion

in practice.

3 Problem Formulation

To answer the why, how, and when of the topic

under inquiry, the study will use an explanatory

design. This is done to better understand the

relationship between business model

innovation, technology capabilities, and SMEs

resilience. Descriptive research design allows

the researcher to look at the research from a

variety of angles and provide a more

comprehensive summary than other types of

research. The study's target population would

be all registered SMEs in Lagos State, as

determined by the Corporate Affairs

Commission. Members of the management

team, including the company's CEO and

owners, supervisors, and directors, who are

members of the National Association of Small

and Medium Scale Enterprise (NASME) (592);

Association of Small Business Owners Nigeria

(ASBON) (414); National Association of Small

Scale Industrialists (NASSI) (522) and

Association of Micro Enterprise of Nigeria

(AMEN) (312), as well as copies of the

questionnaire.

The [18] and [19], statistical procedure was

used to compute the minimal sample

proportion, which resulted in a sample size of

420. This is required to estimate the population

variation at a 5% level of significance and a

95% level of confidence.

Entrepreneurs and associations, or a

combination of both, will be chosen using the

purposive sampling technique. The study will

focus on entrepreneurs who have been in

business for at least five (5) years. Because the

research participants will be chosen from a vast

pool of supervisors, business owners, middle,

and top-level managers of SMEs registered with

the four (4) agencies, this technique becomes

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relevant. These four organizations were chosen

because they are the only ones whose members

have benefited from expert business assistance

from both local and international entities. To

choose streets from the GRA, Lagos State, and

middle area clusters, a convenience sample

technique will be used. To assess for common

technique bias, the variance inflation factor

(VIF) was used. If the VIF is more than 3.3, the

model is affected by common method bias,

according to [19] If all factor-level VIFs from a

comprehensive collinearity test are equal to or

less than 3.3, the model does not suffer from

common method bias. The proposition and

structural resilience VIF scores are both less

than 3.3. This suggests that there is no common

technique bias in the model reported in this

study.

Convergent and discriminant validity were also

taken into account in the study while

establishing construct validity. Convergent

validity indicates that there is a link between the

value proposition and the structure's resilience.

Discriminant validity, on the other hand, does

not require that a measure be highly correlated

with the measures from which it is expected to

differ; instead, it must be substantially

associated with the standards from which it is

expected to deviate. The factor loadings of each

measurement item surpass the prescribed

thresholds. As a result, all of the objects have a

substantial amount of variability.

Furthermore, the methodology equated AVE

with the constructs' squared correlation when

analyzing discriminant validity. The latent

variable's AVE is greater than the dormant and

model constructs' squared correlations. Table 1

displays the factor loadings of all the

assessment items for value proposition and

structure resilience among SMEs in Nigeria, as

reported in the survey instrument. The validity

and reliability of the instrument were further

assessed using composite reliability, average

variance extracted (AVE) computation, and

Cronbach Alpha. Meanwhile, the recommended

requirements for factor loading, composite

dependability, AVE, and Cronbach Alpha were

met.

Table 1. Construct validity and Reliability

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As reported in the study instrument, Table 1 shows

the factor loadings of all the measurement items for

value creation and Sustainable SMEs Resilience

among SMEs in Nigeria. The validity and reliability

of the instrument were further assessed using

composite reliability, average variance extracted

(AVE) computation, and Cronbach Alpha.

Meanwhile, the recommended requirements for

factor loading, composite dependability, AVE, and

Cronbach Alpha were met.

Convergent and discriminant validity were also

considered to determine and to construct validity in

the study. Convergent validity is evidence of a link

between value creation and Sustainable SMEs

Resilience. In contrast, discriminant validity does

not need that a measure is strongly correlated with

the measures from which it is supposed to differ; it

needs to be highly associated with the measures

from which it is expected to vary. Each of the

individual measurement item factor loadings

exceeds the prescribed thresholds. As a result, there

is a significant level of variety in all of the items.

Furthermore, while examining discriminant validity,

the analysis equated AVE with the constructs'

squared correlation. The AVE of the latent variable

exceeds the squared correlations between the

dormant and model constructs.

3.1 Common Method Bias

The variance inflation factor (VIF) was used to

check for common method bias. According to

[19], if a VIF is higher than 3.3, the model is

affected by common method bias. The model

does not suffer from common method bias if all

factor-level VIFs from a comprehensive

collinearity test are equal to or less than 3.3. As

a result, for value creation and Sustainable

SMEs Resilience, all of the VIF values for each

item and measurement construct are less than

3.3.

Table 2. Path Coefficients for Value Creation (VCr)

and Sustainable SMEs Resilience (SSR)

Path

Coefficien

R-

Squar

Std.

Dev

T-

statistic

P-

valu

0852

0.726

0.02

31.680

0.00

Table 2 depicts the smart partial least squared

statistical results, which focused on the relationship

between value creation and sustainable SMEs

resilience. The findings show that value creation

significantly affects Sustainable SMES Resilience.

Specifically, the findings revealed that value

creation has significant influence on Sustainable

SMES Resilience (β= 0.852, R2=0.726, t-

statistics=31.680>1.96, P-value =0.000 <0.05). The

Path coefficient of 0.852 implies a high degree of

relationship between value creation and Sustainable

SMEs Resilience. The R2 value of 0.726 indicates

that a 72.6% variance in Sustainable SMES

Resilience can be explained by value creation.

Table 3. Discriminant Validity

Sustainable

SMES

Resilience

(CR)

Sustainable

SMES

Resilience

(SSR)

Sustainable

SMES

Resilience (CR)

0.784

Sustainable

SMES

Resilience

(SSR)

0.852

0.760

Table 4.17 shows the discriminant validity of the

observed variables' correlation matrix. As seen in

the table, the diagonal elements (1) surpassed the

highest squared association between the research

constructs for all of the research constructs.

4 Problem Solution

The study examined the extent to which value

creation influenced the SMEs resilience of SMEs in

Lagos, Nigeria. The finding revealed that value

creation affects the firms' resilience. This is depicted

in the direct relationship that exists between value

creation and sustainable SMEs resilience. This is

calculated equal to 0.852 with the r-square value of

0.726, which suggests 72.6% variance of sustainable

SMEs resilience is explained by value creation and

the T-statistics of 31.680, which is above the critical

value of 1.96 at the confidence level of 95%. Value

creation is carrying out value chain activities to

provide customers with something they perceive to

be valuable while ensuring that the cost of providing

those advantages does not outweigh the edges—all,

it's about benefits and costs. Customers can benefit

from a product's features, the product's or firm's

brand, the product's or firm's location, the product's

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or firm's network effects, or the product's or firm's

service. This finding validates the submission of

[15]. They opined that when confronted with

disruptive business model developments, leading

firms must decide whether to react with inaction,

resistance, adoption, or resilience. The focus should

be on small dominant business managers' resilient

responses to perceived threats and opportunities

simultaneously. [16] noted that resiliency is

becoming increasingly crucial in today's

socioeconomic environments. This trend is evident

in small and medium-sized businesses due to the

competitive global environment in which we live

(SMEs). These businesses are vulnerable to

unfavourable circumstances because of their limited

resources and capabilities, jeopardizing their

stability, profitability, and growth. These findings

imply that the ability of the SMEs to create,

innovate and often take actions that go beyond the

demands of the situation will perhaps help the SMEs

prioritize customers' expectations. Recognition of

customers' unmet needs in the markets is a function

of value creation. Therefore, SMEs are expected to

focus on optimizing the delivery of products and

ensuring that customers keep getting value for the

products. Invariably, creating new systems, rules,

and metrics that enable firms to implement new

businesses successfully is enhanced by the value

creation model.

4 Conclusion

The study also concludes that if SMEs consistently

search for high-quality business possibilities and

offer better and more affordable products than their

competitors, they will maintain a competitive

advantage in the market. Furthermore, if SMEs

frequently launch new products that suit the needs

of society's people, with the certainty that the

correct items will be available at the right time and

place, such SMEs will remain relevant in the

market. It was concluded that recognizing unmet

client demands in the marketplace is a function of

value generation.

SMEs should concentrate on improving product

delivery and ensuring that customers continue to

receive value for their money. The value creation

approach invariably enhances the establishment of

new processes, regulations, and measurements that

successfully deploy new enterprises. It was also

concluded that SMEs should encourage teams to

build prototypes with fewer resources by regularly

collecting consumer feedback and using various

marketing tactics to obtain customer insights to

make items that satisfy consumers' needs, profits

and assured incomes will increase. SMEs should

also set realistic and achievable goals for their

businesses in providing products and services that

will meet customers' needs to grow their customer

base for positive brand recognition.

SMEs must also intensify efforts to create, innovate,

and often take actions that go beyond the demands

of the situation by prioritizing customers'

expectations. Recognition of customers' unmet

needs in the markets is a function of value creation.

Therefore, it is recommended that SMEs focus on

optimizing the delivery of products and ensuring

that customers keep getting value for the products.

This can be done by creating new systems, rules,

and metrics that successfully implement new

businesses.

Acknowledgment:

The authors of this article acknowledge Covenant

University for full sponsorship of this research.

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Contribution of Individual Authors to the

Creation of a Scientific Article (Ghostwriting

Policy)

-Alake O. R. has carried out the introduction,

literature review, problem formulation.

-Adegbuyi O.A has carried out Abstract and

conclusion.

-Babajide A.A has carried out problem solution

Sources of Funding for Research Presented in a

Scientific Article or Scientific Article Itself

The authors of this article acknowledge Covenant

University for full sponsorship of this research.

Creative Commons Attribution License 4.0

(Attribution 4.0 International, CC BY 4.0)

This article is published under the terms of the

Creative Commons Attribution License 4.0

https://creativecommons.org/licenses/by/4.0/deed.en

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