Examining Leadership Capabilities, Risk Management Practices, and Organizational Resilience: The Case of State-Owned Enterprises in Indonesia

Abstract

This study aims to assess the role of leadership in Indonesia’s State-Owned Enterprises in bringing the companies to be resilient amid uncertainties and a dynamic environment based on dynamic capability theory. Risk management practices are used to mediate the relationship between leadership capabilities and enterprise resilience. The authors conducted a quantitative and cross-sectional study using a questionnaire distributed to members of the board of directors and senior managers of Indonesia SOEs and their subsidiaries. Based on the structural equation modeling analysis, the findings reveal that leadership capabilities play a role in developing enterprise resilience and risk management practice. Additionally, risk management practice partially mediates the relationship between leadership capabilities and enterprise resilience. The empirical findings enrich the knowledge on the relationship between enterprise resilience, leadership capability, and risk management practice. These results enable management SOEs and their subsidiaries and policymakers to develop strategies and a policy framework to create and develop enterprise resilience and help SOEs navigate safely and triumphantly in uncertain and disruptive business environments. This study supports empirical evidence that expands the context of applying the enterprise resilience concept and dynamic capability theory in hybrid organization types, such as SOEs, that operate in emerging countries.

1. Introduction

The globalized and interconnected economy is becoming increasingly complicated, uncertain, and volatile, putting increased pressure on businesses and exposing them to disruptive and unpredictable occurrences on a more frequent basis. Intense market competition, macroeconomics, changing consumer behaviors and preferences, and rapid and disruptive changes. Technological changes, natural and man-made disasters, impacts of climate change, geopolitics turmoil (such as the war between Russia and Ukraine), and health crises such as the COVID-19 pandemic are among the adversities that could threaten the future of the organizations. In these settings, certain enterprises build a resilience profile in order to bolster their capability to predict, modify, reorganize, and also obtain new competitiveness following the crisis caused by internal or external factors [1,2]. Organizations should create and develop a new way of doing business, be more agile, proactive, and prepared to cope with uncertainties or otherwise perish. Capabilities that are dynamics will be necessary.

High-intensity rivalry markets, macroeconomic, changing consumer behaviors and preferences, rapid dan disruptive technological changes, natural and man-made disasters, impacts of climate change, geopolitics turmoil (such as the war between Russia and Ukraine), and health crises such as the COVID-19 pandemic are among the adversities that could threaten the future of the organizations. Enterprises should adjust to changing environments or perish. They could make a responsive adaptation, respond to changing environments or do a proactive or anticipative adaptation, anticipating future changes. A resilient enterprise is one that tries to foresee proactively and repeatedly adapt to whatever uncertain changes present [3,4] by incorporating the activities to develop resilience into the firm’s overall strategies. These unforeseen events have increased the importance placed on the concept of resilience by businesses. It is critical for enterprises to shift from a reactive strategy based on prevention measures to a proactive strategy based on a set of activities able to support everyday operational effectively [2]. Enterprises must create a systematic, proactive approach to achieving resiliency.

The accelerated pace of the changes of the 21st century has heightened the imperative of companies to deal with growing uncertainty [3]. Enterprises and scholars have already been dedicating efforts to developing ways to guarantee their enterprises’ long-term viability and performances in a constantly changing setting [4]. One way to mitigate crises and increase a business’s resilience and a preventative measure is to use enterprise risk management [5]. Studies state that risk management plays a critical role in defining an enterprise’s resilience [6,7,8,9,10,11].

State-Owned Enterprises are among the biggest and fastest-growing sectors of the global economy businesses [12]. Over the last two decades, they have more than doubled in size [12,13,14]. They accounted for approximately 10% of the world’s 2000 largest publicly traded corporations in 2011 and currently account for approximately 20%. The ownership of these SOEs is government, or at least government holds significant ownership [15]. SOEs are not only common in emerging nations, but they also play a crucial role in developed countries [12,13,14,16]. There exist SOEs that are both successful and failed [17]. However, the predominance of government ownership has raised concerns about these enterprises’ performance, which can impede competitiveness and growth in certain circumstances [18]. The influence of these enterprises’ performance on macroeconomic stability and overall productivity will inevitably have spillover effects and destabilize the macroeconomy. Thus, as [16] notes, given their strategic and critical role, efforts to enhance performance and maintain the resilience and sustainability of SOEs have become a priority policy objective in many countries. In Indonesia, SOEs have a long history, and the Constitution obligates the government to be involved in essential industries and natural resources [18]. They have unique missions: to generate value and act as development agents [19]. They provide a substantial contribution to Indonesia’s economic growth. Thus, The performance and sustainability of these SOEs are crucial, as their failure will have a detrimental effect on the economy and social welfare of the country [18,20]. Given the vital role state-owned enterprises and their subsidiaries play in the Indonesian economy, their resilience is critical. Resilience is a long-term strategic endeavor that significantly affects how an organization runs [21]. Thus, the resilience of Indonesia’s SOEs and their subsidiaries is crucial for Indonesia so that they can participate in supporting the economy and providing a better Indonesia. To the authors’ knowledge, research on the resilience of Indonesia’s SOEs is still limited.

Organizational resilience is a company’s capability to devise adaptive measures in reaction to perceived threats to its survival, similar to the ability to respond to disruptions/ruptures [22,23]. Enterprise resilience is also frequently defined as the capability to bounce back swiftly following setbacks, focusing on the capacity to adjust following a disruption [24,25,26]. Nevertheless, an enterprise’s ability to rebound is governed by its dynamic capacities. Dynamic capabilities are referred to as an enterprise’s capacity to generate, expand, or adjust its assets intentionally. They help firms adjust to a new and tumultuous environment [27,28,29,30,31].

Leadership is the executive power that enables a company to be resilient. The leader initiates a forward-thinking dialogue among the firm‘s stakeholders [9]. Leadership from top management teams is a critical component of the strategic management framework for fostering enterprise resilience [3]. They suggest that dynamic capabilities and strategic leadership work in tandem to assist companies in thriving in VUCA settings with their capabilities to do a long-term future business view and see the probable future scenario.

Refs. [32,33,34] advised that leaders should view risks and uncertainties as a natural business element and must prepare for all conceivable future scenarios aggressively and pre-emptively. With a capable leader, resilient businesses will be able to weather the storm of crises and thrive after that.

A comprehensive examination of current organizational resilience research reveals that previous research has concentrated mainly on discrete dimensions, portraying organizational resilience as a static rather than dynamic capability [33]. Additionally, the present body of knowledge regarding organizational resilience research includes conceptual studies, literature reviews, and qualitative studies. There is still a lack of empirically validated findings [2,34,35,36,37,38,39] are examples of studies enterprise vulnerability and resilience in emerging nations, but at the level of nation or community, not on their SOEs. There are limited studies on how public sector organizations develop and maintain resilience [40].

Risk management practices and the incorporation of risk into a company’s integrative strategic options have not been adequately researched [41]. Additionally, even though leadership is critical to the success and viability of any organization [42,43], only a few studies have been conducted to examine the role of leadership in promoting organizational resilience in emerging economies. While significant research on public administration and private organizational leadership has been conducted, there is a dearth of research on public sector leadership [44]. In addition, leadership is a seldom-discussed topic in resilience research [45].

Therefore, given these gaps, this study aims to examine the influence of leadership capabilities as one form of dynamic capabilities on enterprise resilience in coping with all uncertainties and adversities. Additionally, this study examines the role of risk management practice in mediating the relation between leadership capabilities and enterprise resilience. This question will be tested using four hypotheses to answer four (4) research questions: do leadership capabilities influence enterprise resilience? Do leadership capabilities influence risk management practice? Do risk management practices influence enterprise resilience? Do risk management practices mediate the relationship between leadership capabilities and enterprise resilience in Indonesia SOEs.

This study enriches the previous studies on enterprise resilience concerning the theory, framework, and study sample. The findings will contribute significantly to regulators in many developing and emerging nations due to the vital role of SOEs in these countries.

The study’s primary contribution is to demonstrate that dynamic capabilities, specifically leadership capabilities and risk management practices, contribute to developing enterprise resilience in Indonesia’s SOEs and subsidiaries. These findings will enrich the study on strengthening the SOEs, assisting the senior management of SOEs and subsidiaries in selecting the appropriate strategies to attain and maintain viability, and the government as the regulator to develop policies that foster the development of agile and resilient Indonesian SOEs. Since SOEs play a significant role in many emerging countries, other nations (such as other ASEAN countries) could use the findings to improve their SOEs’ resilience to sustain in these uncertain dynamic environments.

This introduction is followed by a literature review on enterprise resilience and dynamic capabilities and a section on hypotheses; the following section discusses the methodology, and the results and discussion sections give the findings and their discussion. Finally, the conclusions discuss the research’s contributions, limitations, and future research suggestions in the final section.

2. Literature Review and Hypotheses

2.1. Resilience and Dynamic Capabilities

The term ‘resilience’ has been used in various research. It is subject to interpretation depending on the discipline of resilient engineering, ecological studies, supply chain management, economics, psychology, or financial management [2]. Ref. [2] conducted a comprehensive literature review and co-citation analysis to identify the current situation of organizational resilience research. Organization resilience research is far from new, yet it is still in its infancy. However, the research is still divided, including achieving operational resilience and developing and sustaining resilient processes. By incorporating the dynamic capabilities concept, enterprises can more efficiently and quickly reorganize their current available resources to respond to opportunities and challenges in the changing situation [27]. This research offers empirical support for the concept of organizational resilience by identifying antecedents, such as leadership capability, that are necessary for organizational resilience to occur.

Organizational resilience relates to a system’s capacity to adapt its processes and systems to its vulnerabilities [46]. There are two broad lines of research on organizational resilience. First, organization/enterprise resilience is used to survive in a disruptive environment, and second, organizational resilience is a means of growing and further transforming the organization in response to environmental changes. The first perspective on organizational resilience is rebound-oriented and usually related to hardiness, which highlights a firm’s capability for positive change and recovery [47]. The second element of this aspect is concerned with the recognition of new business opportunities (sensing and seizing according to [27,30] that, defined by [22,48] as identifying new capabilities development.

According to the dynamic capabilities approach, companies adjust according to their business environment, but they also attempt to shape the environment. Dynamic capabilities include an explicit role of management/leader, which enables structural transformation to begin internally, which would be a cause of firm heterogeneity [49]. CEOs have a critical role in building dynamic capabilities [50]. Their role is critical as their actions and decisions determine how and where the dynamic capabilities will be used. Nonetheless, the role of leadership capabilities in developing enterprise resilience still needs to be explored [51], especially in the context of SOEs in emerging countries. The examination of leadership in SOEs is intriguing because SOEs have dual and challenging commercial and social goals, unlike non-SOE companies, which typically have only one goal of attaining good financial success [52].

Organizational resilience is the capacity of a business to dissipate and create situation-specific responses effectively and eventually through transformative actions to focus entirely on disruptive surprises that jeopardize the firm’s viability [53]. Thus, amid a dynamic and uncertain environment, the dynamic character of the resilience idea has gained prominence. Certain studies address it explicitly [53], while others do it indirectly [22]. Resilience is also referred to as the capacity to mitigate the vulnerability, adapt, adjust, and quickly recover from unforeseen circumstances [54]. These criteria incorporate a dynamic component of the organization’s capabilities [27]. This definition includes the notion of not only surviving adversity but also gaining the flexibility essential to survive, grow, establish a more stable framework, and persist. It is a point of convergence between resilience [53] and the concept of dynamic capabilities [27].

2.2. Leadership Capabilities and Enterprise Resilience

In an uncertain business environment characterized by rapid and sometimes disruptive changes, effective leadership is vital to the organization’s success [48,55]. Leaders assist organizations in adapting to their environment by directing, guiding, supporting, and providing support to their subordinates [43]. The study on supply chain resilience done by [56] found that leadership creates superior resilience performance. Resilient leadership is required to execute organizational strategies that promote resilience by rapidly changing the organization’s entire system and adjusting to changing business climate [57].

Effective leadership and innovation are now being suppressed and needed in today’s ever-changing organizational environment [58,59]. A company’s leadership capabilities may help ensure the company’s resilience [1,53,60,61,62].

Organizational resilience relies on a strong leadership style that encourages unified and interdependent teams to work together [63]. Leaders should be able to detect a challenging situation throughout times of hardship the earliest possible. They determine and decide what should be done by the whole team, coordinate vertically and horizontally, and give understanding and guidance to the team with clear and effective communication. At the same time, create, develop and enhance resilience of all teams throughout this experience [64,65].

Numerous individuals throughout an enterprise engage in leadership activities that require core competencies and are successful in achieving positive outcomes [66]. In the public sector, having leadership charisma and capabilities is crucial to navigating the harsh environment [67,68]. Thus, during times of adversity and disruption, leadership is crucial in propelling the organization to be resilient to move forward toward its ultimate goal as an agent of development, creator of value, and protector of the nation’s interests.

Hypothesis (H1):

There is a significant relationship between Leadership Capabilities and Enterprise Resilience.

2.3. Leadership Capability and Risk Management

Ref. [58] discovered that innovation occurs when a leader allows his team to take a risk that has been carefully planned, executed, and managed by qualified staff. Risk and risk management have always been a concern for all leaders [69]. The leader guides the management team in identifying the risks each organization faces, directing mitigation efforts, and seizing opportunities in challenging times by shifting risk into opportunity. Effective leadership promotes proactive risk management, which increases employee safety behavior [70]. Leaders and crises have a strong correlation [71]. During a shock, the entire organization relies on the leader to take the appropriate action that will protect them all. Thus, a strong leader will motivate the organization to effectively manage uncertain events, enabling the organization to navigate through difficult times and return to normal or better conditions. Risk management that is proactive is the process of anticipating, assessing, controlling, and transferring risk, which involves the recognition, evaluation, control, and redirect of risks [72].

Riskier firms (for example, those with a great deal of leverage) frequently appoint a Chief Risk Officer to demonstrate that they manage their risks effectively and are committed to remaining sound and healthy [73]. Enterprise risk management and organizational resilience are indissolubly connected [59]. They found that enterprise risk management was identified as one factor contributing to organizational resilience. Chopra and Sodhi [74] emphasize the importance of the manager knowing the characteristics and effectiveness of supply chain risks to form or enhance the firm’s capabilities for further effective risk management by becoming more resilient.

Hypothesis (H2):

There is a significant relationship between Leadership Capability and Risk Management Practice.

2.4. Risk Management Practice and Enterprise Resilience

Businesses must look beyond short-term performance in an uncertain world where change is constant. They must be resilient to unforeseen risks of change and emerge more robust. In summary, they must be resilient. Firms should make every effort to incorporate resilience into their operations in a way that benefits them in normal times as well as in the face of unpredictable threats or change. One of the efforts is applying proactive risk management [75]. The health crisis of pandemic COVID-19 that started at the end of 2019 taught us that businesses must improve their preparation and planning for major risks and disruptions to be resilient to compete and stay sustainably in the business. Despite this, many organizations fail to take the necessary steps toward resilience by not preparing proactive risk management [76].

Risk management provides an effective foundation for organizations to be more proactive in coping with the unexpected in a constantly changing business environment [77]. Ref. [5] suggest that Risk management is the path that an enterprise requires if it wishes to be resilient in today’s dynamic environment. Enterprises are frequently ill-prepared for crisis response. Thus, one of the tools that assist in preventing crises and enhancing the enterprise’s resilience is the application of enterprise risk management. Risk management enables businesses to be more vigilant and thus more resilient. Risk management is now more focused on managing extreme uncertainty, the risk associated with the unknown of unknown [10].

Ref. [78] shows the crucial role of supply chain innovation and risk management capabilities in ensuring long-term competitiveness and resilience. Ref. [77] found that proactive risk management and the capabilities to reorganize firm resources have a more significant beneficial impact on the firm resilience. The study by [79] about risk and resilience in the supply chain suggests that due to the interconnected nature of today’s supply chain, it is unavoidable that enterprises might very well encounter catastrophic risk, which is why resilience has to be a principal goal of any organization risk management strategy. Thus, resilience is the objective of risk management practice. Analyzing risks and mitigating them is vital in creating resilience [38,80,81]. Creating an enterprise’s resilience will not negate the necessity of having risk management [9]. Enterprise resilience and risk management do not exist independently. As a result, risk management practices lead to the enhancement of enterprise resilience.

Hypothesis (H3):

There is a significant relationship between Risk Management Practice and Enterprise Resilience.

2.5. The Mediating Effect of Risk Management Practice on the Relationship between Leadership Capabilities and Enterprise Resilience

In the dynamic and uncertain business environment, companies must boost their response due to unexpected shocks. Risks are viewed as crucial to project successes and failures [82]. Ref. [83] examine the impact of organizational resilience and Top Management narcissism on the success of the project. They found that risks management partially mediates the impact of project performance. In their study [38] incorporated risk management as a contributory factor to a firm’s resilience in the face of all possible risks. They discovered that firms’ ability to dynamically reassess and reconfigure their resources in response to changing environmental conditions requires risk management to prioritize this capability. Additionally, they discovered that risk management capabilities enable businesses to build and sustain resilience in turbulent environments as a component of a dynamic capability.

Ref. [84] found that even though the company has directed its strategy to cope with supply chain disruption, it is insufficient to build resilience. The firm must have the capabilities and abilities to rearrange its resources according to the need and to implement risk management. Ref. [85] discovered that risk management practice helps the enterprises cope with deficiencies, both proactive and reactive, by promoting robustness and agility that needs to enhance value and performance. They found evidence that developing risk management capabilities can better address the risks, and a leader has a vital role in fostering strong warning and recovery capabilities. Ref. [86] conclude that leadership commitment and relationship magnitude influence firms’ supply chain robustness capabilities, which is part of resilience [87]. A study by [81] on 171 managers shows a relationship between supply chain capabilities and resilience and the moderating effect of supply chain risks. They found that supplier perception and management of risk help motivate supply chain managers to strengthen their integration capabilities and thus achieve greater resilience.

Hypothesis (H4):

Risk Management Practice is mediating the relation between Leadership Capability and Enterprise Resilience.

Figure 1 shows the proposed conceptual framework of this study. The dependent variable in this framework is organizational resilience, and the independent variable is leadership capabilities. Risk management practices function as both an independent and mediating variable. Simultaneously, the size of the organization and the age of the corporation are employed as control variables. The size is the average revenue over the last three years, while the age is the number of years since the SOEs were formed.

3. Methodology

A questionnaire is used to collect data for a survey. This study focuses exclusively on state-owned firms in Indonesia and their subsidiaries. Non-probability sampling based on a purposive sample method was applied in this study, which was suitable given the scope and nature of the research. The sample frame for this study included all members of state-owned enterprises (SOEs) and subsidiary companies’ boards of directors or senior management. These individuals are responsible for planning, directing, and monitoring the organization’s strategic operations and decision-making processes, as well as data collecting and analysis. The overall population sample selection was utilized in this study (SOEs and their subsidiaries) that met the criteria for participation [88]. Members of the Board of Directors or senior management of SOEs or SOE subsidiaries must continue to serve on the Board of Directors or senior management to be eligible for participation in this research. Prior research on particular target groups and organizations used the same survey sample, drawn from the entire population [88,89].

Indonesia was chosen as the context for this study due to its size and activity as well as its dynamic economy. Indonesia has developed as a promising market for a diverse wide range of businesses in recent years (https://www.investindonesia.go.id, accessed on 17 May 2019), and the Indonesian economy is strongly reliant on state-owned enterprises (SOEs) [18]. Firms must survive and prosper in a complex country with a fast-changing nature, such as emerging countries. Then, it will be a rich context to test dynamic capability [90]. The findings of this study may have ramifications for enterprises in other emerging nations.

This research uses a deductive, cross-sectional quantitative approach, utilizing a survey strategy. To generate insights at the organizational level (as a unit of analysis) in this study, we targeted members of the Board of Directors (BOD) and senior management of all SOEs and their subsidiaries listed on the Indonesia Ministry of State-Owned Enterprises website (https://bumn.go.id/, accessed on 30 April 2020) and the website of each SOE. They are chosen as respondents since they are the key actors managing, directing, and deciding the enterprise’s strategies and policies. Purposive sample was selected because the questionnaire required respondents to meet particular criteria, including being on the board of directors or senior management of SOEs or their subsidiaries. As a result, comparative to random sampling is expected to improve the generalizability of findings. Second, the criteria for this study were determined independently. When respondents provide favorable in most utilized evaluations in their responses, self-rating performance by perception judgments can create difficulties. As a result, when evaluating the outcomes of this study, any bias related to the self-report questionnaire should be noted. Thirdly, this study examined using a cross-sectional time horizon. The data was gathered during the outbreak of COVID-19. As a result, it was swayed by the circumstances, which might have been different had the data been acquired at a different period.

The questionnaire was developed in English and Bahasa Indonesia so that respondents could complete it in either language. There were 114 SOEs and 530 SOEs subsidiaries at the time of field research (June 2020–August 2020). Due to the respondents’ busy schedules and the fact that the field research took place during Indonesia’s time of total confinement because of the COVID-19 pandemic obtaining responses was difficult. Online survey from June to August 2020 using Google Form. The author used social media (WhatsApp) with the snowballing strategy to obtain sufficient samples. The authors received three hundred and eighty-eight completed responses. After data screening, 66 responses were invalid, making useable responses 322. To analyze data collected and hypotheses testing, the authors use PLS-SEM Smart PLS 3.

To measure Enterprise Resilience (ER) as an endogenous variable, we adopted fourteen (14) indicators from studies by [32,91,92,93,94]. Exogenous variable leadership capabilities (LC) were measured using eleven (11) indicators. Risk Management Practice (RMP) was used as mediating variable and was assessed using eleven (11). Our risk management measurement was derived from the ERMi—Enterprise Risk Management Index [95]. Measurement of Leadership Capabilities was adapted from [96,97,98], adjusted to Indonesia SOEs context. A seven-point Likert scale was used to operationalize the measurement, ranging from strongly disagree to strongly agree (for LC, RMP, and ER). For questions related to financial resilience, the authors use the notion of very weak to very strong. We ask the respondents to fill in their self-reported financial data in demographic data [99]. Respondents are asked to indicate how their enterprise’s performance level compares to that of their rival companies.

Due to the pandemic and lockdown policies, this study used an online questionnaire [100]. The online questionnaire made data collection, sorting, and evaluation more efficient. The online questionnaire was developed using Google Forms, which is well-suited for data collection. Comparable studies using partial least squares (PLS) statistical analysis used sample sizes of 145 responses, indicating that the sample size of 322 is adequate for the data analysis techniques used in this study [101].

Prior to distribution to respondents, the survey instrument was tested with 31 SOEs Board of Directors and five academicians to ensure the quality and suitability of the measurement items. The final questionnaire incorporated expert input and suggestions. We do the common method bias test since the same informant answers were exogenous and endogenous variables. We followed the procedure recommended by [102]. We mention in our cover letter that we kept their responses anonymous and confidential. Refs. [103,104] proposed the full collinearity test as a comprehensive procedure for assessing both vertical and lateral collinearity concurrently. A VIF greater than 3.3 is proposed as a sign of pathological collinearity and a sign that a model may be contaminated by common method bias. If all VIF obtained from a full collinearity test are equal to or less than 3.3, the model is free of common method bias, and our model fulfills the criteria. The data were analyzed using the SmartPLS 3 software using the partial least squares structural equation modeling (PLS-SEM) method with reflective models.

Additionally, this study included firm size (average revenue over the last three years) and firm age as control variables. These two variables have been found to have an impact on enterprise performance or survivability in other empirical studies [105,106,107]. There is evidence in the literature that investors value firm size [108]. Ref. [109] suggest a life cycle for dynamic capability even though this cycle could repeat by renewal, replication, redeployment, or recombination. This cycle could be considered as an improvement process that, in return, could improve firm performance. The age of a firm, defined as the number of years since its inception, has been suggested to affect both its performance and innovation activities [110].

4. Results and Discussion

4.1. Descriptive Statistics

Table 1. Descriptive Statistics—Constructs.

Constructs	Mean	SD	Skewness		Kurtosis
			Statistic	Std. Error	Statistic	Std. Error
RMP	5.855	0.752	−0.676	0.136	0.423	0.271
LC	6.336	0.570	−0.757	0.136	0.194	0.271
ER	5.510	0.780	−0.670	0.136	0.854	0.271

presents the mean value, standard deviation, and normality assessment in terms of skewness and kurtosis of each variable in the structural model. This study’s descriptive analysis of constructs includes Risk Management Practices, Leadership Capabilities, and Enterprise Resilience.

Table 2. Demographic Profile.

Variables	Categories	Frequency (n: 322)	Percentage (%)
ENTERPRISE PROFILE
Enterprise age	1–10 years	73	22.67
	More than 10–20 years	47	14.60
	More than 20–30 years	46	14.29
	More than 30–40 years	24	7.45
	More than 40–50 years	44	13.66
	More than 50 years	88	27.33
Number of Employees	Less than and equal to 500	157	48.76
	501–1000	39	12.11
	1001–10,000	99	30.75
	More than 10,000	27	8.39
Type of SOEs	SOEs—Persero Listed	31	9.63
	SOEs—Persero	94	29.19
	SOEs—Perum	7	2.17
	Subsidiary of SOEs	190	59.01
Core Business	Agriculture, forestry, and fishery	27	8.39
	Mining and excavation	13	4.04
	Processing industry	50	15.53
	Electricity and gas supply	13	4.04
	Water and waste management	3	0.93
	Construction	42	13.04
	Trade and retail	14	4.35
	Transportation and warehousing	61	18.94
	Provision of accommodation	4	1.24
	Information and communication	10	3.11
	Financial and insurance	54	16.77
	Real Estate	20	6.21
	Professional scientific and technical services	11	3.42
Average revenue in the last 3 years (in Billion IDR)	Less than and equal to 1000	154	47.83
	1001–10,000	114	35.40
	More than 10,000	54	16.77
INFORMANT PROFILE
Gender	Male	274	85.09
	Female	48	14.91
Age	Below 30 years	4	1.24
	30–40 years	41	12.73
	41–50 years	120	37.27
	Above 50 years	157	48.76
Position	CEO	99	30.75
	Finance & Risk Director	59	18.32
	Others Director	56	17.39
	Senior Manager	108	33.54
Education	Doctor/PhD	12	3.73
	Master	173	53.73
	Degree/Bachelor	134	41.61
	Diploma 3 or below	3	0.93
Length of Service in Current SOEs	Less than one year	46	14.29
	1–5 years	135	41.93
	5–10 years	33	10.25
	More than ten years	108	33.54
Length of Service in Previous SOEs	0 year (Never)	129	40.06
	Less than one year	3	0.93
	1–5 years	27	8.39
	5–10 years	22	6.83
	More than ten years	141	43.79
Length of Service in non-SOEs	0 year (Never)	140	43.48
	Less than one year	35	10.87
	1–5 years	75	23.29
	5–10 years	22	6.83
	More than ten years	50	15.53
Background	Professional	250	77.64
	Politician	0	0.00
	Bureaucrat	10	3.11
	Academician	24	7.45
	Others	38	11.80

presents the enterprise profile and the informant profile of the respondents.

4.2. Path Coefficient

The path model is depicted in Figure 2. All indicators in Risk Management Practice have a value greater than 0.708, indicating that the constructs reflect more than half of the variance in the construct they represent [111,112]. One factor loading for Leadership Capabilities and four-factor loadings for Enterprise Resilience has a value lower than 0.708. However, since the value of AVE is higher than 0.5, that means indicator reliability is still greater than 0.50, we kept the factors, and the convergent validity still met the criteria. Path coefficient from Leadership Capabilities to Risk Management Practice is 0.677, from Leadership Capabilities to Enterprise Resilience 0.354; the relationship of Leadership Capabilities to Risk Management Practice is stronger than Leadership Capabilities to Enterprise Resilience. The path coefficient of Risk Management Practice to Enterprise Resilience is 0.475. The R² for Risk Management Practice is 0.458, and R² for Enterprise Resilience is 0.572. Thus, 45.8% of the proportion of variance of Risk Management Practice could be explained by Leadership Capabilities. Leadership Capabilities and Risk Management Practice could explain 57.2% of the proportion of variance in Enterprise Resilience. Thus, Leadership Capabilities could explain the variable Risk Management Practice and Enterprise Resilience quite well.

4.3. The Measurement Model Assessment

Table 3. PLS Result: Measurement model Analysis and Model Fit Indices.

	Internal Consistency		Convergent Validity	Model Fit
	Cronbach’s Alpha	Composite Reliability	AVE	SRMR
LC	0.941	0.949	0.630	0.065
ER	0.940	0.948	0.567
RMP	0.942	0.950	0.635

exhibits constructs and items for three variables, acceptable reliability, and convergent validity values for all constructs. To evaluate internal reliability, we use Cronbach Alfa and composite reliability. All Cronbach alfa and composite reliability values are above 0.70 and below 0.95; thus, the model has good reliability [112,113]. The average variance extracted (AVE) is used to determine convergent validity; all three constructs have an AVE value greater than the threshold of 0.5 [111,112]. SRMR value (as the goodness of measure for PLS-SEM) less than 0.08 is considered a good fit [114].

As shown in

Table 4. Discriminant Validity (HTMT).

	CV Age	CV Rev	ER	LC	RMP
CV Age
CV Rev	0.199
ER	0.051	0.039
LC	0.076	0.063	0.689
RMP	0.141	0.066	0.741	0.716

Note Criteria: Discriminant validity is established at HTMT < 0.9 Henseler et al. (2015) [116] or at <0.85 (Diamantopoulos & Siguaw 2006) [115].

, the result of discriminant validity, the highest value in the matrix was 0.69, below the threshold value of 0.85 [115,116] or 0.9 for conservative criterion [117]. Therefore, sufficient evidence showed that the measures met the discriminant validity criteria. Every construct is distinct from other constructs in its correlation with other constructs and how distinctly the indicator represents only the single construct. Thus, the results show that all components in the measurement model met the criteria.

4.4. The Structural Model Assessment

Before assessing the predictive capabilities of the model/structural model, the lateral collinearity has been checked for all relationships (Inner VIF values), and the result is <3.3 [118]. So, there are no collinearity issues among the constructs.

The structural model’s output is shown in

Table 5. Structural Model Assessment.

	R2	f2	Q2
ER	0.572		0.315
RMP	0.458		0.287
LC 🡢 RMP		0.845
RMP 🡢 ER		0.281
LC 🡢 ER		0.158

. All factor loadings have t-values greater than 1.96 two-tailed, p < 0.05 [115]. Enterprise Resilience has an R² of 0.567, while Risk Management Practice has an R² of 0.456. As a result, the model has a moderate to substantial predictive accuracy [112,115]. The effect size of the predictor relationship (the f² value) for Leadership Capabilities to Enterprise Resilience is 0.158 (medium), 0.845 (substantial) for Leadership Capabilities to Risk Management Practice, and 0.281 (medium) for Risk Management Practice to Enterprise Resilience [118]. The prediction relevance of model (Q²) for Enterprise Resilience is 0.315, and for Risk Management Practice is 0.287. Since the value of Q² is above zero, it indicates that the Leadership Capability (exogenous construct) has the model’s predictive relevance concerning the Risk Management Practice and Enterprise Resilience (endogenous latent variables). Thus, the paths model’s predictive accuracy is acceptable for this particular construct [112]. To summarize, the model has quite substantial predictive capacity.

The PLS program generates t-statistics for significance testing of both the inner and outer models using bootstrapping. The bootstrapping procedure was done using 5000 subsamples as the maximum number of iterations to test the significance of path coefficients. The process involves examining the relationships between the constructs and testing the hypotheses.

Table 6. Hypotheses testing.

Direct Effects	β	SD	t-Value	p-Value	Decision
H1: LC 🡢 ER	0.354	0.059	6012	0.000	Supported
H2: LC 🡢 RMP	0.677	0.037	18,489	0.000	Supported
H3: RMP 🡢 ER	0.475	0.053	8915	0.000	Supported
Mediating Effects	Beta	S.E.	t-value	p-value	Decision
H4: LC 🡢 RMP 🡢 ER	0.322	0.048	6759	0.000	Supported

presents the result of hypotheses testing

The survey findings support hypothesis one (H1), indicating that leadership capability has a significant effect on enterprise resilience (β = 0.354, t-value > 1.96, p-value < 0.01). The results support Hypothesis two (H2) by demonstrating that leadership capability has a significant effect on risk management practice (β = 0.677, t-value = 18.209, p-value < 0.01). The results support Hypothesis three (H3) by demonstrating that risk management practices have a significant effect on enterprise resilience (β = 0.475, t-value p-value < 0.01). The hypotheses are supported. The findings indicate that the mediating effect of risk management on the relationship between leadership capability and enterprise resilience (β = 0.322, t-value = 6.638, p-value < 0.01). Hypothesis four (H4) is supported.

Finally,

Table 7. PLS Predict.

(PLS)	RMSE	MAE	MAPE	Q²_ Predict	(LM)	RMSE	MAE	MAPE	Q²_ Predict
ER1	0.703	0.552	10,770	0.396	ER1	0.729	0.575	11,251	0.351
ER2	0.708	0.559	10,728	0.384	ER2	0.696	0.573	10,815	0.404
ER3	0.752	0.597	11,743	0.362	ER3	0.758	0.606	11,818	0.352
ER4	0.841	0.652	13,574	0.299	ER4	0.859	0.671	13,890	0.268
ER5	0.917	0.701	16,082	0.253	ER5	0.963	0.720	16,672	0.177
ER6	0.810	0.625	14,018	0.396	ER6	0.812	0.634	14,051	0.394
ER7	1.075	0.791	19,066	0.176	ER7	1.105	0.809	19,502	0.128
ER8	0.879	0.679	14,978	0.280	ER8	0.899	0.699	15,437	0.248
ER9	0.857	0.649	14,666	0.319	ER9	0.879	0.672	15,088	0.283
ER10	1.197	0.957	25,188	0.088	ER10	1.211	0.970	25,212	0.065
ER11	1.215	0.968	27,303	0.069	ER11	1.217	0.973	27,266	0.067
ER12	1.124	0.879	22,355	0.083	ER12	1.134	0.892	22,560	0.066
ER13	1.065	0.822	20,378	0.170	ER13	1.063	0.834	20,376	0.173
ER14	1.101	0.882	23,008	0.098	ER14	1.100	0.886	22,972	0.098
RMP1	0.728	0.509	9803	0.279	RMP1	0.757	0.527	10,086	0.221
RMP2	0.691	0.522	9442	0.283	RMP2	0.713	0.536	9714	0.238
RMP3	0.742	0.582	10,892	0.325	RMP3	0.771	0.594	11,143	0.271
RMP4	0.757	0.596	11,141	0.294	RMP4	0.774	0.612	11,427	0.261
RMP5	0.766	0.607	11,503	0.278	RMP5	0.789	0.616	11,696	0.233
RMP6	0.757	0.604	11,429	0.342	RMP6	0.770	0.604	11,416	0.319
RMP7	1.007	0.776	16,440	0.198	RMP7	1.030	0.793	16,829	0.161
RMP8	0.917	0.719	15,409	0.306	RMP8	0.937	0.729	15,644	0.277
RMP9	1.066	0.828	19,657	0.230	RMP9	1.060	0.816	19,482	0.238
RMP10	0.809	0.616	12,089	0.286	RMP10	0.814	0.626	12,180	0.277
RMP11	0.728	0.554	10,521	0.312	RMP11	0.731	0.552	10,393	0.307

shows the PLS prediction model [119] that assesses a model’s accuracy when predicting the outcome value of new cases. All Q² are >zero. It means that the predictive power of the PLS-SEM analysis for that indicator outperforms the most naïve benchmark (i.e., the indicator means from the training sample). Comparing RMSE values in PLS with RMSE in LM, most indicators in the PLS analysis have lower RMSE values than the naïve LM benchmark, which indicates a medium predictive power [119].

4.5. Discussion

The data support the hypothesis of a significant impact of leadership capabilities on enterprise resilience as suggested by previous studies [53,57,59,61,120]. The result indicates that SOEs must have good professional leaders with strong and complete capabilities to enable companies to navigate safely and triumphantly to the enterprise’s ultimate objective. This result could be used by the Ministry of State-Owned Enterprise for consideration when appointing someone as a director or senior manager since their decision and leadership determine the company’s future.

The analysis results support the hypothesis that a significant impact of leadership capabilities on risk management practice as suggested by previous studies [59,70,71,74]. This result suggests that SOEs and their subsidiaries must invest in a sound risk management system and practice being proactive and preemptive in sensing and seizing the risk management practice in a significant environment, including the opportunities offered. Good risk management practices will help companies be more agile and thus be more flexible.

This study supports the hypothesis that impacts enterprise resilience. This result is in line with previous studies [9,38,41,77,80,81,121,122]. This result strengthens that the approach of a proactive strategy to prepare for the uncertain future will benefit the enterprises.

The findings show that risk management practice mediates the relation between leadership capabilities and enterprise resilience, as found in previous studies [83,84]. This result suggests that companies could develop and increase their resilience by applying good risk management and by having good leaders who can sense the risks and opportunities in every adversary event to reconfigure all the capabilities owned by companies to seize the opportunities [2].

5. Conclusions

This research adds to the growing body of knowledge on risk management and enterprise resilience from a dynamic capability theory view, especially in public organizations (state-owned enterprises) operating in emerging markets. Despite the abundance of resilience research, research on state-owned firms and emerging markets remains rare. It is well known that dynamic capabilities are important for excellent performance. This study also emphasizes the role of risk management practices in fostering organizational resilience and mediating leadership capabilities and resilience. The studies also revealed that corporate resilience can be built over time and grows stronger each time it overcomes adversity. Previous studies focused on dynamic capabilities without considering risk since the study on how companies dealt with high uncertainty/risks is less developed in the literature. The study also found that the size and age of SOEs do not affect their ability to establish and strengthen enterprise resilience. This study could potentially be used to build future research on the enterprise resilience of SOEs in other emerging countries. A study comparing private and public sector enterprise resilience would help stakeholders make sound decisions. The findings indicate that risk management approaches boost enterprise resilience. These findings may persuade the Ministry of SOE to apply risk management approaches across all SOEs, including subsidiaries, to build and improve resilience. The Ministry of SOE could further develop a set of enterprise resilience measures and guidelines to achieve resiliency. The findings of this study could be considered by policymakers (i.e., the Minister of SOEs) in appointing good leaders for the SOEs. The leaders appointed should have rich capabilities that would be useful in developing the company’s dynamic capabilities and creating or developing enterprise resilience. The findings could also be used to develop strategic-based scenario planning to strengthen Indonesia’s SOEs in disruptive and turbulent periods.

This study is not without limitations. First, respondents were asked to rate all questionnaire items subjectively on a seven-point Likert scale to assess enterprise resilience, risk management practices, and alliance management capabilities. These assessments will be influenced by personal bias and judgment error. Second, this study provides a cross-sectional view at a single point in time, which means that the recommendations apply only if external variables remain constant. Third, the sample was drawn from a single type of enterprise ownership, a state-owned enterprise, without regard for industry classification, which could result in different results. The findings may not be applicable to other types of enterprise ownership or be generalizable to other types of enterprise ownership.

Future research could investigate further what other capabilities could have a role in creating and supporting enterprise resilience. the future research could complete the methodology by doing mixed-method data collection, qualitative and quantitative, to acquire more complete bases to derive the complete conclusion about enterprise resilience and its antecedents. This study could also be replicated on private firms in Indonesia or SOEs in other countries to ascertain the broad impact of dynamic capabilities on enterprise resilience. Study on specific industry sectors would also enrich the body of knowledge and provide practical guidance since the challenges and competition in each industry are different. Finally, a survey with different respondents (for example, stakeholders) in one company could also be envisaged since every level in the organization could probably have a different perspective on enterprise resilience. The result of this kind of study will be beneficial in gathering the perceptions of all the stakeholders so that the enterprise resilience can be developed as a process and objective by all stakeholders. In conclusion, further study on SOEs resilience in Indonesia and other emerging countries would be beneficial considering the crucial role of SOEs in each respective nation.