Navigating Uncertainty: The Role of Human Resource Management in Strengthening SMEs Competitiveness

Abstract

This study investigates the pivotal role of human resource management (HRM) and strategic agility in enhancing the competitiveness of small and medium-sized enterprises (SMEs) amidst an era of heightened uncertainty. Employing a quantitative research design, data were collected from SMEs in the food and beverage sector in East Java, Indonesia — a region known for its dynamic entrepreneurial ecosystem. The findings reveal that effective HRM practices have a positive and significant impact on strategic agility, which, in turn, serves as a key driver of SME competitiveness. Furthermore, strategic agility functions as a mediating factor in the relationship between HRM and competitiveness, highlighting the critical interplay between internal capabilities and market responsiveness. Notably, environmental turbulence acts as a moderating variable, amplifying the effect of strategic agility on competitiveness, underscoring the necessity for SMEs to continuously adapt and innovate in response to external market disruptions. This study offers an evidence-based approach for strengthening SME competitiveness through enhanced human capital and strategic agility. The results indicate that realizable strategies including adaptive training, cross-functional collaboration, market responsiveness, and continuous innovation can significantly improve SMEs sustainability.  These objectives are closely aligned with the initiatives that have been taken by the Indonesian Employers’ Association (APINDO).