Strategic Adaptation of Enterprises in Changing Economic Conditions: A Quantitative Analysis Based on COVID-19 Impact

Abstract

Small and medium-sized enterprises (SMEs) contribute nearly 24% of Azerbaijan's non-oil GDP and represent the overwhelming majority of registered businesses, yet their post-crisis strategic behaviour in a post-Soviet transition economy remains underexamined. The COVID-19 pandemic exposed structural vulnerabilities — supply chain disruptions, limited digital readiness, and uneven access to government assistance — that compelled Azerbaijani SMEs to rapidly reconfigure their strategies. This study investigates how digital transformation, government support, risk awareness, and exposure to international SME practices influenced post-crisis strategic change, drawing on the Resource-Based View, Dynamic Capabilities Theory, and Transaction Cost Economics. A cross-sectional online survey using Computer-Assisted Web Interviewing was distributed to managers of Azerbaijani SMEs operating during 2020–2021 through snowball sampling and direct outreach. After data cleaning, an effective sample of 274 valid responses was retained for analysis, supplemented by ten semi-structured interviews with SME managers. The 37-item instrument was validated through a pilot study with 20 managers, demonstrating acceptable internal consistency (Cronbach's α ranging from 0.78 to 0.89) and exploratory factor analysis explaining 72% of total variance. Pearson correlation and multiple regression analyses were conducted in line with post-hoc power adequacy (f² = 0.15; 95% power). The regression model explained 42% of the variance in strategic direction change (Adjusted R² = 0.42; F = 11.26; p < 0.001). Digital transformation emerged as the strongest predictor (β = 0.37; p < 0.001; r = 0.46), followed by application of international SME practices (β = 0.21; p < 0.05). Firm size and annual turnover were statistically insignificant, indicating that adaptive capacity depends on strategic orientation rather than organisational scale. Approximately 60% of SMEs prioritised digital tools, 70% adjusted operations to shifting consumer behaviour, and 70% accessed at least one government support programme, although the modest correlation of support utilisation with strategic change (r = 0.29) suggests limited regulatory effectiveness. The study contributes to the economics–regulation interface by providing empirical evidence on how Azerbaijani SMEs reduced coordination costs through digitalisation, extending RBV and Dynamic Capabilities Theory to transition economies, and informing post-crisis policy design for the Ministry of Economy and SME Development Agency.