“The impact of knowledge management on SMES’ performance during the COVID-19 pandemic: Assessing the significance of digital variables”

The purpose of this study is to investigate the impact of knowledge management on the performance of small and medium-sized enterprises during the COVID-19 period in Indonesia. Furthermore, the study also highlights the role of digital variables such as digital capability, digital orientation, and digital innovation as mediating variables. A total of 247 valid responses were collected for this study through the survey conducted among managers of SMEs in Indonesia. The collected data were analyzed using Structural Equation Modeling with the Partial Least Squares approach. The study’s findings revealed several significant insights. It established the positive impact of knowledge management on digital capability, digital orientation, and digital innovation during the COVID-19 pandemic. Additionally, the study identified digital capability as a mediating factor between knowledge management and SMEs’ performance. However, the full support for the mediating roles of digital orientation and digital innovation in the relationship between knowledge management and SME performance was not confirmed, suggesting potential context-specific variations. This implies that the influence of knowledge management on SMEs’ performance is mainly channeled through digital capability. The research underscores the importance of knowledge management and digital factors in shaping SMEs’ performance, particularly in the challenging context of the COVID-19 pandemic.


INTRODUCTION
The exploration of knowledge management's role and its impact on the performance of Small and Medium Enterprises (SMEs), especially in times of crisis such as the COVID-19 pandemic, holds profound significance.In the face of unprecedented challenges posed by the pandemic, SMEs have been grappling with disruptions in supply chains, fluctuating consumer behavior, and mobility restrictions, all of which have starkly impacted their performance.flecting SME resilience.However, Micro, Small, and Medium-Sized Enterprises were severely impacted by the COVID-19 pandemic.The production of Micro and Small Industries (MSIs) declined by 17.63% in 2020 due to mobility restrictions, worsened by Large-Scale Social Restrictions (PSBB).A Mandiri Institute survey of 2,944 MSMEs found 19.3% closed due to COVID-19 policies, and 47.0% operated with constraints during PSBB.Business hour restrictions led 72.04% to report reduced earnings in July and August 2021.Amid this context, effective knowledge management practices can play a transformative role in empowering MSMEs to navigate the complexities of the crisis.By harnessing and sharing critical insights, market trends, and innovative strategies, knowledge management equips SMEs with the tools necessary to make informed decisions, swiftly adapt to changing circumstances, and uncover novel avenues for growth.Moreover, the pandemic has underscored the importance of building resilience, anticipating risks, and fostering adaptability, all of which are enhanced through robust knowledge management processes.This examination into the interplay between Knowledge Management and SMEs` performance amid the COVID-19 pandemic not only sheds light on the dynamics at play but also offers actionable insights that can bolster the ability of SMEs to weather crises, emerge stronger, and contribute to economic stability.
Furthermore, as SMEs confront the challenges posed by the pandemic, the integration of effective knowledge management practices enables them to navigate uncertainties and lays the foundation for the adoption and effective utilization of digital tools and strategies.Digital capability, encompassing technical proficiency and expertise in digital technologies, is fortified by the insights derived from Knowledge Management.SMEs with comprehensive knowledge are better poised to select, implement, and optimize digital tools that align with their unique business needs and market dynamics.Simultaneously, digital orientation, the strategic alignment of digital efforts with organizational objectives, is bolstered by the insights gleaned from knowledge management practices.This interplay ensures that digital initiatives are rooted in a deep understanding of the market, customer preferences, and emerging trends, driving the pursuit of meaningful innovation.
Consequently, the potential of digital innovation, which represents the transformational outcomes resulting from the synergistic blend of digital capability and orientation, is magnified by the insights harnessed through knowledge management.It is through this cohesive framework that MSMEs can not only weather the storm of crisis but also harness the opportunities presented by the digital landscape to enhance their performance and ensure long-term resilience.Thus, assessing the significance of these digital variables in the context of Knowledge Management offers a comprehensive understanding of how effective knowledge utilization underpins the strategic integration of digital elements, ultimately shaping the trajectory of MSMEs during and beyond crisis scenarios.

LITERATURE REVIEW AND HYPOTHESES
In the ever-evolving digital era, Knowledge Management (KM) has become a crucial factor in a company's success in maintaining its competitive advantage.KM is a strategic approach that helps organizations organize, acquire, capture, and share knowledge effectively (Lee et al., 2001

METHOD
The study used question items from  1).
To gather data for the study, a survey was developed and shared with managers of SMEs in Indonesia from July to December 2021.The participants were selected using purposive random   Note: n = 247.
The collected data were subjected to variance-based analysis using SEM (Structure Equation Modeling), specifically employing Partial Least Squares (PLS).PLS was chosen as the analytical method due to its flexibility and ability to handle complex models without imposing strict assumptions and theoretical foundations (Hair et al., 2016).The data were analyzed using both the outer and inner models.The outer model was first tested to evaluate the reliability and validity of the variables.Multiple criteria, such as convergent and discriminant validity, as well as composite reliability, were used to assess the model.Additionally, each construct was examined to ensure that all factor loadings were greater than 0.70, and the average variance extracted (AVE) was greater than 0.50, indicating convergent validity.
The inner model, on the other hand, was tested to investigate the relationships between the study concept, the significant value, and R-square.This structural method allowed for a deeper understanding of the interconnections between the variables and their effects on each other.By employing variance-based analysis, the study provides robust insights into the mediating role of digital capability, digital innovation, and digital orientation in the relationship between knowledge management and firm performance among SMEs in Indonesia.

RESULTS
The examination of the data's validity and reliability continued with a detailed analysis of the variables as presented in Table 3 The outcomes of the R-square analysis, presented in Table 4, offer insights into the proportion of variability within the dependent variables that is accounted for by the structural models.These estimations provide valuable information on the extent to which the predicts the vari-  Table 5 shows systematic analysis of structural equation modeling hypotheses.This summary highlights the construct-test result relationships and their significance.The path coefficient of 0.358 supports Hypothesis 1 (H1) that Knowledge Management (KMN) improves Digital Capability (DIC).This coefficient's t-statistic of 6.754 and P-value of 0.000 support the hypothesis.In H2, Knowledge Management (KMN) and Digital Orientation are examined.P-value less than 0.000, path coefficient 0.262, t-statistic 4.499, and path coefficient support H2's claim of a positive and significant influence.A path coefficient of 0.274, a t-statistic of 4.647, and a P-value less than 0.000 show a positive and significant correlation between Knowledge Management (KMN) and Digital Innovation (DII).The result supports Hypothesis 3 (H3).Hypothesis 4 (H4), which examines how digital capability (DIC) affects company performance (PER), has a path coefficient of 0.395.This result, with a t-statistic of 6.393 and a P-value of 0.000, supports H4 that Digital capability (DIC) improves Company Performance (PER).Hypothesis 5 (H5) examines the relationship between digital orientation (DIO) and company performance.With a path coefficient of 0.187, a t-statistic of 2.673, and a P-value below 0.008, Hypothesis 5 (H5) is supported.Hypothesis 6 (H6) examines DII and PER.The path coefficient was 0.147, the t-statistic 2.124, and the P-value less than 0.034.H6 is supported by this strong result demonstrating DII and PER's positive and significant effects.

DISCUSSION
This study examines the impact of knowledge management on SMEs` performance.Furthermore, the study highlights the roles of digital variables, such as digital capability, digital orientation, and digital innovation, in mediating the relationship between knowledge management and SME performance during the COVID-19 pandemic, thereby supporting H1, H2 and H3.

CONCLUSION AND RECOMMENDATIONS
The primary objective of this study was to examine the impact of knowledge management on SMEs' performance and to explore the mediating roles of digital capability, digital orientation, and digital innovation in this relationship during the COVID-19 pandemic.The study utilized a survey methodology and collected data from managers of SMEs in Indonesia through purposive random sampling.A total of 247 valid responses were collected for this study through the survey conducted among managers of SMEs in Indonesia.The collected data were analyzed using Structural Equation Modeling (SEM), which allowed for a comprehensive assessment of the proposed relationships.
The findings of the study provided several significant insights.The positive influence of knowledge management on digital capability, digital orientation, and digital innovation during the COVID-19 pandemic was established.The study also found that digital capability plays a mediating role between knowledge management and SME performance.However, the mediating roles of digital orientation and digital innovation in the relationship between knowledge management and SME performance were not fully supported, indicating potential context-specific variations.This suggests that the influence of knowledge management on SME performance is predominantly channeled through digital capability.
This study underscores the importance of knowledge management and digital variables in shaping SME performance, particularly in the challenging context of the COVID-19 pandemic.The study's outcomes align with previous research, highlighting the interconnectedness of knowledge management, digital capability, digital orientation, and digital innovation.However, the nuanced findings regarding the mediating roles of digital orientation and digital innovation call for further investigation and nuanced understanding in the pursuit of advancing knowledge in this field.
The implications of these findings are noteworthy for both theory and practice.The study contributes to the existing literature on knowledge management, digital capability, and SME performance by high-lighting the mediating effects of digital capability and the nuanced roles of digital orientation and digital innovation.Practically, SMEs should prioritize knowledge management practices that enhance digital capability, as this plays a pivotal role in improving overall performance.Moreover, a balanced approach that considers both digital orientation and digital innovation is essential for achieving sustained success in the dynamic digital landscape.
For future research, it is recommended to conduct more comprehensive investigations into the mediating roles of digital orientation and digital innovation, considering potential contextual influences.Further exploration of different industries and regions could shed light on variations in the relationships observed.Additionally, longitudinal studies could provide insights into the long-term impact of knowledge management and digital variables on SME performance, especially in the post-pandemic recovery phase.
(KMN4) I actively participate in training or self-development activities to enhance my knowledge (KMN5) Digital capability (DIC) I feel I have sufficient skills and knowledge in operating digital technology to support my business (DIC1) Wang et al. (2022), Heredia et al. (2022), Zhou and Wu (2010), Khin and Ho (2020) I actively adopt digital technologies such as websites, social media, e-commerce, and business software in my business operations (DIC2) I have adequate access to digital infrastructure, such as stable internet connection and hardware, to support the use of digital technology (DIC3) I regularly participate in digital training or development programs to enhance my skills and understanding of digital technology (DIC4) I quickly adapt to technological changes and emerging market trends (DIC5) I am involved in e-commerce or have an online platform to sell products and services (DIC6) My customers interact and engage actively through digital channels such as social media or websites (DIG7) Digital orientation (DIO) I am aware that adopting digital technology can enhance the efficiency and competitiveness of my business (DIO1) Bendig et al. (2023), Khin and Ho (2020), Gatignon and Xuereb (1997), Zhou et al. (2005) I actively search for opportunities to utilize digital technology in various aspects of my business (DIO2) I proactively integrate digital technology innovations into my products, services, or business processes (DIO3) I have adequate plans and resources to address challenges in the process of business digitalization (DIO4) I am prepared to adapt to the changes brought about by the adoption of digital technology in our business (DIO5) Digital Innovation (DII) I creatively and innovatively utilize limited digital resources to support my business activities ( Concurrently, Digital capability (DIC), Digital orientation (DIO), and Digital Innovation (DII) seem to be influenced by Knowledge Management (KMN), highlighting the intricate relationships among these variables.In assessing the overall effectiveness of the inner model, the R-square values of the dependent variables are analyzed alongside the Q-Square test size and the magnitude of the structural path coefficients.The Q-Square measure, a critical evaluation criterion in Partial Least Squares (PLS), reflects the structural component of the model's predictive performance.The Q-Square value, calculated as 1 -(1 -0.128)•(1 -0.065)•(1 -0.075)•(1 -0.322) = 0.488, indicates that the model accurately explains approximately 48.8% of the variability in DIC, DIO, DII, and KMN.The remaining 51.2% of variance is influenced by external factors beyond the model's scope.Integrating the Q-Square measure into the analysis enhances the understanding of the predictive capacity of the model and its implications for the relationships between the constructs.
and P-values to support conclusions.In Hypothesis 7 (H7), Digital capability (DIC) mediates Knowledge Management (KMN) and Company Performance (PER), with a path coefficient of 0.141.The t-statistic is 3.879, well above the critical value of 1.96, and the P-value is 0.000.These findings support H7. Digital capability (DIC) mediates the partnership between Knowledge Management (KMN) and Company Performance (PER).The examination of Hypothesis 8 (H8) shows that Digital orientation (DIO) does not mediate the effect of Knowledge Management (KMN) on Company Performance (PER).A path coefficient of 0.049 and a t-statistic of 1.873 fall short of the 1.96 threshold.Additionally, P = 0.062.The rejection of H8 suggests that Digital orientation (DIO) does not mediate the relationship between Knowledge Management (KMN) and Company Performance (PER).Hypothesis 9 (H9) shows that Digital Innovation (DII) does not mediate the effect of Knowledge Management (KMN) on Company Performance.The path coefficient is 0.040, with a t-statistic of 1.662 and a P-value of 0.097 -both below the critical thresholds.It is concluded that Digital Innovation (DII) does not mediate the relationship between Knowledge Management (KMN) and Company Performance (PER).

Table 1 .
Measurement items

Table 2 .
sampling, and a total of 247 valid responses were collected.Preliminary processing was conducted to ensure the accuracy and sufficiency of respondent entries.The survey was divided into two sections and delivered using Google Forms.The first section gathered profile data such as gender, number of workers, education level, age, and period of company operation.The values of all the variables under inquiry were included in the second section.Sample demographics My customers provide positive feedback and are satisfied with the services after digital technology adoption (PER4) Digital technology adoption has enabled me to create new products or services or enhance the existing ones (PER5) Source: Author calculation (2023).

Table 4 .
R-square results

Table 3 .
Validity and reliability result

Table 5 .
Summary of path coefficient

Table 6 .
Summary of mediation effects

Table 6
displays the results of PLS with 5,000 bootstrapped subsamples to assess digital variables' mediating role.This table quickly summarizes mediation analyses, including path coefficients, t-statistics, Wang et al. (2022)rientation and digital innovation might not have substantial mediating effects in this specific context.Further research and exploration are necessary to better understand these contradictory outcomes.inthisregard, the study's outcomes align withWang et al. (2022), who discussed the importance of digital capability and digital innovation in responding to market changes and achieving competitive advantage.However, the complex interplay of digital orientation and digital innovation as mediators might require more comprehensive investigations to grasp their roles fully.