Firms’ Resilience and COVID-19: Evidence from Indonesia

The ability of firms to survive external shocks, such as economic crises, wars, or pandemics, is increasingly tied to the knowledge economy and the application of innovation strategies. This study examines the impact of uncertainty on firm resilience, focusing on the COVID-19 pandemic, by developing and evaluating a resilience index through micro-level analysis. It further investigates how knowledge-driven innovation strategies enhance resilience, reinforcing the understanding of how the knowledge economy can strengthen a firm's competitive advantage during uncertain times. Utilizing Principal Component Analysis (PCA) with data from Indonesia’s Large and Medium Manufacturing Survey (2010–2021), the study analyzes performance trends and categorizes firms into resilient and non-resilient groups. The results indicate that resilient firms generally performed better but experienced declines during the pandemic. Dynamic panel analysis using the First Difference Generalized Method of Moments (FD-GMM) revealed that innovation strategies improved resilience during the COVID-19 pandemic, while layoffs, although negatively affected performance, also contributed to short-term resilience. The findings emphasize the importance of knowledge-based innovation strategies and suggest potential applications of the Quadruple and Quintuple Helix frameworks to strengthen firm resilience further and support economic recovery. This study’s contributions to the knowledge economy indicate the need for future research into specific strategies leveraging these frameworks to navigate ongoing uncertainties.