Crisis Management and Customer Adaptation: Pathways to Adaptive Capacity and Resilience in Micro- and Small-Sized Enterprises

Abstract

Micro- and small-sized enterprises (MSEs) play a key role in developing emerging countries’ economies. However, concerns remain about their resilience and continuity, especially during periods of conflict and crisis. To address this gap, this research explores key factors that enhance adaptive capacity (AC) and entrepreneurial resilience (ER) amongst MSEs. Data were collected from 301 micro- and small-sized entrepreneurs operating different business activities using an online questionnaire and on-site visits. Partial least squares–structural equation modeling was employed to analyze the data. Findings revealed that crisis management preparedness (CMP) and customer-centric adaptation (CCA) positively and significantly influence AC, which, in turn, positively affects ER. In addition, CMP and CCA directly influence ER. Moreover, AC partially mediates the relationship between CMP, CCA, and ER. This study offers significant practical and theoretical implications for policymakers in making strategic action plans.

1. Introduction

Micro- and small-sized enterprises (MSEs) have been proven to play a key role in economic development, providing employment, reducing poverty, maximizing self-efficiency, developing innovative ideas, fostering financial inclusion, and empowering individuals, especially in developing countries [1,2,3,4,5,6]. Despite their positive contributions, MSEs face challenges such as limited resources, poor technology adoption, reliance on unstable industries, and difficulties in survival, sustainability, and adaptability during crises and disruptions [3,7]. This highlights the need to develop greater resilience [3], enabling them to withstand crises and challenges.

SMEs’ inability to grow and survive may be attributed to factors such as lack of management experience, insufficient determination and initiatives, inadequate governmental support, poor infrastructure, insufficient training, lack of funds, and low readiness levels [5,8]. This highlights the need for MSEs to develop strategies that enhance their survival, resilience, and continuity, particularly during times of crisis [1,9]. Entrepreneurs must form crisis teams, analyze business vulnerabilities, and evaluate earlier performance plans to create effective crisis strategies [9].

Resilience and crisis management have recently received considerable attention in the literature due to their significant effect on business survival. Nevertheless, research continues to call for analyses of how crisis management influences business survival, especially amongst MSEs, as most previous studies have focused on larger organizations [10]. Moreover, the literature has called for further investigations and understanding of the business continuity management needs and components of crisis management [9,11]. Understanding how to manage a business and prepare for a crisis is crucial, as entrepreneurs with crisis management skills and risk-oriented mindsets are more likely to develop adaptive capacity (AC) in their business environment and are quicker to identify changes within it [12]. The developed AC includes identifying changes in production processes, developing new products and services, and seeking technological advancements that can benefit the business [12,13]. Being adaptive allows entrepreneurs to deal with changes in their surroundings quickly.

Understanding various strategies to develop AC is crucial. One key strategy includes comprehending continuous customer needs and requirements, especially during challenging times and crises. Entrepreneurs capable of identifying and understanding customers’ needs can adapt their strategies and business processes to meet those needs [14,15], leading to improved survival and entrepreneurial resilience (ER) [16].

AC can improve poor business performance under challenging conditions or crises by adjusting the business model; this adjustment involves sensing market trends, seizing business opportunities, and utilizing available resources [17,18,19], all of which lead to meeting customer needs and ensuring business survival and continuity even during difficult times. Crises and challenges negatively influence MSEs; therefore, MSEs need to adapt their business models to market trends resulting from crises or challenges to expand soundly and maintain good customer relationships [17,19].

MSEs’ vulnerability indicates the need for more resources, planning, and strategic initiatives to survive crises and achieve resilience [10,20,21]. MSEs must adopt crisis management practices, understand customer needs, develop practical strategies, and design clear frameworks to address events that negatively influence them and their societies [10,15]. MSEs’ resilience and survival may require adapting to changes in the business environment by introducing innovative products and services, developing innovative pricing strategies, maintaining good network collaboration, receiving necessary training, and reducing costs [2,3,22]. These strategies align with the need to understand the role of resilience amongst MSEs [6,23].

This research focuses on key factors contributing to developing entrepreneurs’ AC by developing crisis management preparedness (CMP) skills and understanding customer-centric adaptation (CCA). CMP involves strategic planning, resource allocation, and developing resiliency practices to respond effectively to crises [24,25]. Effective CMP encompasses developing contingency plans outlining actions for unstable situations and emergencies [26]. CMP also assists in managing stress, making sound decisions, and developing adaptive behaviors [26,27]. Tolerance for ambiguity and risk management further contribute to adapting behaviors amongst small enterprises [28].

In addition to CMP, entrepreneurs should focus on market scanning, monitoring customer behaviors, cultivating loyalty, tracking competitors’ pricing, and providing personnel training. These actions help businesses respond efficiently to challenges, thereby enhancing their resilience [14,15]. AC may require more focus on CCA, which involves actions such as shifting to online sales and curbside pickups to strengthen AC by effectively responding to crises [29]. AC ensures meeting clients’ requirements, increasing satisfaction [30], and focusing on profitable customers [31]. Enterprises prioritizing CCA tend to connect well with clients, enhancing their ER and AC [17,19].

Accordingly, this study contributes to the available literature in several ways. Firstly, it addresses the limited attention paid to MSEs’ resilience, survival, and adaptation during crises, especially in developing countries. Secondly, it identifies the relationships between AC, CMP, CCA, and ER as a theoretical model, filling a literature gap. Thirdly, it provides insights from data collected in a politically and economically unstable country, enriching the understanding of AC and ER during crises. Finally, it emphasizes the importance of MSEs, which are often overlooked in favor of large organizations despite being the backbone of the economy. This study includes sections on the study’s context, literature review, hypothesis development, research methodology, data analysis, discussion, and conclusion.

2. Context of This Study

Since the internal conflict began in March 2015, the Yemeni MSE sector has faced many challenges, especially in Sanaa City—the capital of Yemen—which hosts a massive percentage of MSEs, as per available statistics. The internal instability has severely affected MSEs, with 24% of micro-sized enterprises and 27% of small-sized enterprises closing due to insecurity, capital loss, and continuous price increases [32,33]. These enterprises have suffered significant material and human losses, leading to economic strain and liquidity issues. The COVID-19 pandemic further exacerbated these challenges, causing a 20% drop in business demand and a 49% decrease in purchasing power. In addition, financial inclusion is extremely low amongst micro- and small-sized entrepreneurs, with approximately only 6% of adults having bank accounts, emphasizing the need for increased access to financial services. Given these challenges, Yemeni MSEs need urgent interventions and initiatives to secure access to financing, rehabilitate infrastructure, and develop strategies to support their survival and economic contributions [1,32,33]. Addressing these needs is essential, particularly during crises and conflicts, to ensure their ER, continuity, and overall survival.

This study aims to contribute academically by offering support to micro- and small-sized entrepreneurs and their businesses, enabling them to adapt to instability, withstand crises, and recover from adversity. This study offers new academic initiatives designed specifically for MSEs in Yemen to fill the existing research gap on how these enterprises can build resilience and adapt during crises. This is particularly important given that much of the available literature does not align with the current objectives of this study. For example, Alhakimi and Mahmoud (2020) [34] only studied the connection between market orientation and innovativeness; Abdullah et al. (2018) [35] discussed the benefits and barriers of e-businesses amongst MSEs in Yemen; Alshebami (2024) [7] examined how entrepreneurs’ network ties and recovery capabilities influence MSE sustainability; AlQershi et al. (2022) [36] showed how human capital influences customer relationship management; and Alshebami (2025) [1] investigated how coping with unexpected challenges and defining core purposes enhance MSEs’ ER during adverse conditions.

3. Theoretical Background and Hypothesis Development

3.1. Theoretical Background

This study applies the dynamic capability theory (DCT), proposed by Teece et al. (1997) [18], as its foundational framework. The DCT discusses how businesses adapt, grow, and stay competitive over time by continuously improving their abilities. In particular, the theory concentrates on understanding how businesses can benefit from resources, skills, and decision-making processes to navigate external changes and survive. More specifically, the dynamic capabilities of an enterprise encourage the business to ‘create, deploy and protect the intangible assets that support superior long-run business performance’ [37]. These dynamic capabilities include ‘distinct skills, processes, procedures, organisational structures, decision rules and disciplines, which undergird enterprise-level sensing, seizing and reconfiguring capacities’ [18,37].

The DCT emphasizes the need for enterprises to sense changes (opportunities or threats) in their surroundings, which aligns with CMP. CMP argues that entrepreneurs should anticipate and prepare for crises by practicing proper planning, training, and adequate allocation of business resources. This sensing capacity allows entrepreneurs to deal effectively with potential crises, thereby enhancing AC. Furthermore, the theory focuses on opportunities through the more effective use of strategies and resources. This notion corresponds to the study’s argument that entrepreneurs who possess a strong ability to understand customer needs and demands can implement adaptable strategies to better meet those needs and grasp available business opportunities accordingly. Moreover, the DCT emphasizes transforming available capabilities and resources to adapt to new opportunities and challenges. Therefore, entrepreneurs with strong AC recover from crises and sustain themselves quickly in the long run [18,38].

3.2. Hypothesis Development

3.2.1. CMP, AC, and ER

As indicated earlier, MSEs are vulnerable and continuously need support for their survival, resilience, and continuity. Micro- and small-sized entrepreneurs need to remain prepared and adaptable to crises and challenges to ensure the survival of their businesses. Crisis preparedness is essential for the survival of small businesses. However, its benefits are limited due to MSEs’ inadequate resources and short governmental support, necessitating the development of policies that enhance resilience in vulnerable situations [3]. Crisis planning and management encompass different actions, including evaluating and addressing vulnerabilities to minimize the effects of crises [9] and ensure improved business continuity [10,39].

CMP and response strategies are essential for business performance and survival [10,40] as they help entrepreneurs prepare and train themselves for potential challenges and crises by adapting to changes occurring in the external environment. According to Herbane et al. (2004) [11], continuous crisis training on crisis management, including the ability to respond before and during emergencies, enhances entrepreneurs’ ability to act effectively during crises. This learning process enhances AC within the business and allows entrepreneurs to handle crises and disruptions more effectively. Prepared and alert entrepreneurs can recover more quickly from crises as they have well-exercised plans, which enhance their AC and responsiveness to challenges [11]. Effective CMP typically involves five steps, as follows: the formation of a crisis team, evaluation and analysis of vulnerabilities, development of strategies, implementation of plans, and assessment of performance, ultimately resulting in developing adaptable and resilient individuals capable of withstanding adversities, recovering from setbacks, and developing competitive advantages [9].

Empirically, Kiiveri et al. (2024) [41] argued that resilience and adaptation can be managed amongst MSEs by following a developed crisis management application named ‘Crises Assistant’, comprising the following four steps: ‘preparedness, the beginning of the crises, during the crises and after the crises’. This framework helps entrepreneurs follow clear guidelines for managing crises and adapt to them more effectively.

Entrepreneurs’ adaptation level is also a result of their characteristics and levels of environmental change, leading to improved business performance [14]. According to Ali et al. (2017) [21], the size of a small business determines its resilience, barriers, and risks. Nevertheless, small businesses that receive support from networks or peer groups can better sustain and recover from challenges, allowing the business to remain more adaptable to crises. Entrepreneurs with better managerial skills and risk-oriented planning tend to exhibit greater AC toward environmental changes [12], often by altering their productive processes and other business behaviors.

Arraya et al. (2024) [17] emphasized the importance of managerial capabilities in enabling businesses to adjust strategically, create customer value, and adapt processes, thereby allowing MSEs to better manage shocks and crises [42]. Mafimisebi et al. (2023) [10] found that small entrepreneurs benefit from practicing crisis planning, improvisation, and resilience strategies. Entrepreneurs engaging in simulation exercises and strategic crisis planning are more likely to ensure business survival [10]. In addition, those who maintain good connections with customers and suppliers develop good business networks that are necessary for handling crises and emergencies [3,26].

Based on the above discussion, the author argues that CMP is essential for MSEs’ resilience, adaptability, survival, and continuity. CMP prepares micro- and small-sized entrepreneurs to develop different strategies, practices, and plans that help them adapt to external changes, manage crises effectively, and remain resilient and adaptable during crises. Accordingly, the following hypotheses are developed:

H1: 

A higher level of CMP leads to better AC amongst MSEs.

H2: 

A higher level of CMP leads to better ER amongst MSEs.

H3: 

AC positively mediates the relationship between CMP and AC.

3.2.2. CCA, AC, and ER

ER and continuity require entrepreneurs to have adequate resources and proper management to sustain their businesses and withstand crises and other challenges. Business survival, especially during crises, needs resilient and adaptable individuals capable of understanding customers’ needs and adjusting business processes to navigate external challenges; accordingly, one may argue that the survival of a business depends mainly on its capacity for adaptation [16]. Moreover, it becomes crucial to understand customers’ needs during crises, such as challenges related to mobility and emergency situations (e.g., the COVID-19 pandemic). This enhances the importance of adapting business processes, such as switching to online operations, to meet customers’ needs, emphasizing the significance of understanding and responding to customer needs in such situations [29]. MSEs struggling with external shocks are encouraged to adjust their business models to align with current market trends, thereby achieving better customer relationship development and maintaining connections with existing customers [17,19].

Entrepreneurs who deeply understand their clients’ needs develop strategies and techniques that address dynamic and diverse market scenarios. Furthermore, adopting a customer-centric approach enables MSEs to predict potential changes, respond effectively to challenges, and seize opportunities with agility. When entrepreneurs align products, services, and operations with their clients’ needs, they cultivate better adaptability, thereby strengthening their resilience and allowing them to eliminate uncertainties, mitigate risks, and sustain growth even in volatile environments. In other words, focusing on customer needs (CCA) outlines the importance of understanding, addressing, and satisfying customer demands [30].

Empirical evidence supports these notions. For instance, Sheth et al. (2000) [31] concluded that customer-centric marketing involves understanding and satisfying customers’ wants, needs, and resources rather than focusing on mass markets. Customer-centric marketing also determines whether to serve clients directly or via a third party, as well as customizing products and services to achieve optimal results based on cost–benefit analyses. Furthermore, the same study highlighted the need to focus on profitable customers, which is particularly relevant for MSEs with limited resources. Moreover, Wilder et al. (2014) [43] found that identifying customer needs entails understanding their feelings and concerns, predicting their needs before expressing them, and employing creativity to devise innovative solutions to meet those needs. This approach ultimately leads to greater responsiveness and adaptability to customer demands.

Based on the above discussion, AC can be developed amongst micro- and small-sized entrepreneurs by following different strategies. These strategies include adapting to customer needs, aligning with market conditions, and adjusting products and services to enhance entrepreneurs’ preparedness for crises, external pressures, and disruptions [14,15]. Hence, the following hypotheses are framed:

H4: 

A higher level of CCA leads to better AC amongst MSEs.

H5: 

A higher level of CCA leads to better ER amongst MSEs.

H6: 

AC positively mediates the relationship between CCA and AC.

3.2.3. AC and ER

AC and ER are important aspects of business survival [40]. AC refers to an individual’s ability to adjust to uncertainties, challenges, and changes by being open to new approaches, demonstrating resourcefulness, and maintaining flexibility [14]. ER indicates people’s capacity to withstand setbacks, recover from failures, and continue operating during crises and challenges [44,45]. AC indicates the ability of entrepreneurs to adjust their policies and strategies in response to internal or external pressures and adapt accordingly [15]. It further indicates the ‘creation of slack resources, deliberate inefficiency, and the organisation that wanders in terms of variation in standard practices and market focus’ [14]. In other words, AC is enabled through intentional efficiency (room for experimentation), slack resources (extra funds, time, and material) to deal with crises, and flexibility (the ability to change strategies and processes when required). These factors collectively contribute to improved crisis recovery, resilience, and growth for entrepreneurs and their businesses.

Chakravarthy (1982) [16] highlighted that adaptation is essential when dealing with environmental challenges; however, current research underscores the uncertainty surrounding how firms can successfully adapt to disruptions [46,47].

Adaptive entrepreneurs (prospectors) predict changes and challenges and prepare for them in advance. This proactive approach leads to greater resilience, reduced vulnerability to crises, and a stronger competitive edge in the market. AC enables entrepreneurs to process information, adjust their behavior, and change their actions, strategies, and decision-making processes in response to new information or changes in market conditions, resulting in developing resilient individuals who can stand during crises and challenges [17]. Empirical studies corroborate the importance of AC in strengthening ER. Kiiveri et al. (2024) [41] emphasized the effectiveness of a crisis assistant application designed to provide real-time guidance and updates for entrepreneurs, enhancing their ability to handle and withstand crises. Similarly, Abbasi (2024) [48] confirmed that organizational agility mediates the relationship between effectual decision-making logic and micro- and small-sized entrepreneurs’ resilience during crises. This aligns with the arguments stating that AC is essential for ER during crises.

From the above discussion, AC assists entrepreneurs in scanning their surroundings and recognizing changes, such as evolving customer needs, new market entrants, and economic conditions. By responding proactively, entrepreneurs can demonstrate higher confidence and greater resilience, enabling them to endure crises. Accordingly, the following hypothesis is proposed:

H7: 

A higher level of AC leads to better ER amongst MSEs.

4. Operational Definitions

Table 1. Operational definitions of the concepts of this study.

Concept	Operational Definition	Source
CMP	CMP refers to entrepreneurs’ capacity to proactively plan, identify, respond, train, and implement strategies that encourage their business to anticipate, respond, and recover from crises by enhancing a crisis awareness culture, ensuring clear communication, allocating essential resources, and taking informed business decisions and actions.	[10,25]
CCA	CCA refers to entrepreneurs’ ability to align their business strategies, decision making, and business operations with customer needs and satisfaction by practicing continuous monitoring of customer feedback, adjusting business strategies to meet customer needs, and achieving a competitive advantage.	[49]
AC	AC is the ability of entrepreneurs to effectively collect essential information, adjust business operations, make informed decisions, and allocate available resources to respond to unexpected market changes, external challenges, customer needs, or environmental disruptions. For example, during a lockdown, businesses quickly changed to online sales models.	[14]
ER	ER refers to entrepreneurs’ or businesses’ capacity to bounce back from traumatic events; cope with adversity, disruptions, or crises, and thrive after specific challenges. ER focuses on recovery, endurance, and growth after adversity rather than adapting to changes. For example, during a financial crisis, businesses must recover from it and expand into new markets.	[44]

Source: Author’s development.

explains the operational definitions of the study.

5. Conceptual Model

The research problem and the existing research gap in the literature motivated the development of the conceptual model in Figure 1. Following a careful review of the literature, the proposed model identifies two independent variables, namely, CMP and CCA. It also encompasses one dependent variable, ER, and incorporates AC as a mediating variable. The interaction of these concepts is analyzed and discussed through various sections of this research.

As illustrated in Figure 1, the proposed conceptual model outlines the relationships between CMP, CCA, AC, and ER.

6. Research Methodology

6.1. Data Collection and Research Design

This study aims to understand the influence of CMP and CCA on AC and ER. To achieve its objectives, the research adopted a deductive methodology and employed a quantitative research method. This design requires sufficient sampling from the target population to test the proposed hypotheses. This study collected data from 301 micro- and small-sized entrepreneurs operating different types of enterprises in Yemen, specifically in Sanaa City, the capital and key hub for MSEs in the country. The researcher ensured that the collected sample included a diverse range of businesses, as described in the demographic section of this research. Data were collected using an online, self-administered questionnaire complemented by on-site visits to the business locations to enhance reliability and honesty in the responses.

The researcher ensured that questionnaire respondents were either business owners, managers, or individuals with the authority and expertise to accurately answer questions regarding business management. The researcher also ascertained that the sample was collected only from MSEs, excluding other types of businesses, to meet this study’s objectives. The collected sample totaled 301, which is considered adequate for this research according to the 10-times rule of sampling method [50,51]. Given the lack of reliable and valid databases for contact or follow-up with Yemen’s MSEs, random sampling was unfeasible. Thus, the author employed a combination of convenience and snowball sampling methods; these techniques were chosen because they are practical, cost-effective, and yield quick results [52,53]. Snowball sampling is also necessary to ensure more responses, as respondents will introduce their colleagues who are more suitable for the study. The measures in the study were originally developed in English and were then translated into Arabic to better suit the study context. Before distributing the questionnaire, the researcher conducted a pilot study to ensure the clarity of the questions and identify any potential issues. Once the pilot study was executed, the questionnaire was kept online, and on-site visits to the MSEs started and lasted for around two months (December 2024 and January 2025).

6.2. Measures of the Study

As the study model comprises different concepts, the author referred to authentic sources to adopt the measures employed in this research. The first concept—CMP—was adopted from the study of Elsubbaugh et al. (2004) [25], and a sample of the questions used was, ‘I can monitor potential crisis issues and adjust my strategies as needed’. The second concept—CCA—was adopted from the research of Tuominen et al. (2023) [49], and a sample of these measures included ‘I actively monitor and adjust my strategies based on my commitment to serving customers’ needs’. Furthermore, the concept of AC was adopted from Schindehutte and Morris (2001) [14], and a sample of these measures was ‘I can quickly adjust my business activities to respond to unexpected changes’. Finally, the concept of ER was adopted from the study of Fatoki (2018) [44], and a sample measure used included ‘I can stay focused under pressure’. These measures were then tested, evaluated, and confirmed to be good and reliable for measuring the concepts of the study. Full questionnaire used in this study is attached in the Appendix A.

7. Analysis and Results

7.1. Descriptive Statistics

The study sample analysis revealed 301 male respondents (80.4%) and female respondents (19.6%). Concerning the participants’ marital status, about 61.8% were married, and 35.9% were single. The largest group was between 29 and 39 years old (42.5%), followed by the 18–28 years group (41.2%). Regarding the respondents’ educational level, 39.5% held a bachelor’s degree, 33.9% had a high school diploma, and only 3% had a postgraduate qualification. Regarding work experience, 34.2% had less than 5 years, 33.6% had between 5 and 10 years, and 32.2% had more than 10 years of work experience. Regarding business types, most of the participants worked in retail and wholesale (63.1%), followed by services (19.9%), with smaller percentages involved in small-scale manufacturing and agriculture. Most enterprises were small, with 82.1% employing between 1 and 3 people, whereas the remaining enterprises employed 4–9 employees.

7.2. Measurement Model

In partial least squares–structural equation modeling, starting the analysis by evaluating the CR and the validity of the constructs is crucial. Hence,

Table 2. Construct reliability (CR) and validity.

	Cronbach’s Alpha (CA)	CR	Average Variance Extracted (AVE)
AC	0.764	0.832	0.414
CCA	0.786	0.854	0.540
CMP	0.792	0.852	0.490
ER	0.742	0.823	0.438

Source: Primary data.

reports the results of the CR and the validity of the constructs used in the study. The findings for CA for all constructs (AC = 0.764, CCA = 0.786, CMP = 0.792, ER = 0.742) exceed the threshold of 0.7, confirming the presence of high internal consistency [54]. Correspondingly, CR values (AC = 0.832, CCA = 0.854, CMP = 0.852, ER = 0.823) are above 0.8, indicating the reliability of the study constructs [54].

Furthermore, the AVE test was performed to examine the level of variance in a construct’s indicators, captured by the construct itself. The AVE scores obtained are as follows: AC = 0.414, CCA = 0.540, CMP = 0.490, and ER = 0.438. All the AVE values are close to or above the recommended threshold of 0.5, indicating satisfactory convergent validity. Despite a slightly low AVE value for some variables, it is still considered acceptable for exploratory research [54], especially with good reliability and significant results.

Table 3. Indicator factor loadings.

	AC	CCA	CMP	ER
AC2	0.684	0.386	0.359	0.380
AC3	0.691	0.365	0.294	0.427
AC4	0.608	0.306	0.263	0.340
AC5	0.600	0.369	0.379	0.378
AC6	0.654	0.330	0.297	0.393
AC7	0.607	0.359	0.366	0.322
AC8	0.656	0.429	0.294	0.421
CCA1	0.428	0.750	0.253	0.400
CCA2	0.427	0.774	0.224	0.343
CCA3	0.465	0.774	0.308	0.376
CCA4	0.409	0.715	0.421	0.399
CCA5	0.349	0.654	0.246	0.351
CMP1	0.320	0.220	0.623	0.262
CMP2	0.326	0.258	0.718	0.293
CMP3	0.373	0.240	0.703	0.300
CMP4	0.339	0.336	0.739	0.412
CMP5	0.371	0.289	0.722	0.386
CMP6	0.372	0.309	0.689	0.360
ER2	0.395	0.322	0.353	0.632
ER3	0.335	0.243	0.328	0.627
ER4	0.370	0.272	0.230	0.606
ER5	0.379	0.383	0.389	0.719
ER6	0.482	0.402	0.334	0.728
ER7	0.379	0.373	0.280	0.647

Source: Primary data.

reveals the results of the indicator factor loadings, with the threshold for indicator loading set at 0.70. Most of the indicators in the study have factor loadings of 0.70, whereas other indicators have values of 0.60, which is also acceptable in exploratory research [54,55]. Higher factor loadings indicate that the constructs explain more than 50% of the indicators’ variance, demonstrating good reliability of the items.

Table 4. Heterotrait–monotrait ratio (HTMT).

	HTMT
CCA↔AC	0.728
CMP↔AC	0.642
CMP↔CCA	0.497
ER↔AC	0.781
ER↔CCA	0.659
ER↔CMP	0.622

Source: Primary data.

shows the result of the discriminant validity test, which evaluates the discriminant validity between different constructs in the study. The finding confirms that all values are below 0.90, indicating enough discriminant validity in the study constructs.

Moreover, the Fornell–Larcker criterion results are presented in

Table 5. Fornell–Larcker criterion.

	AC	CCA	CMPS	ER
AC	0.644
CCA	0.568	0.735
CMPS	0.501	0.397	0.700
ER	0.593	0.509	0.485	0.662

Source: Primary data.

for an additional verification of discriminant validity. The findings show adequate discriminant validity, as the square root of each construct’s AVE exceeds its correlations with other constructs.

Table 6. Correlations amongst study constructs.

	AC	CCA	CMP	ER
AC	1.000	0.568	0.501	0.593
CCA	0.568	1.000	0.397	0.509
CMP	0.501	0.397	1.000	0.485
ER	0.593	0.509	0.485	1.000

Source: Primary data.

indicates the correlation coefficients among the study variables. All correlations are positive, with the strongest correlation found between AC and ER (0.593), and the weakest found between CMP and CCA (0.397).

7.3. Structural Model

Table 7. Path coefficient.

	Relationship	β	M	T Values	p Values	Decision
H1	CMP→AC	0.327	0.331	6.184	0.000	Accepted
H2	CMP→ER	0.218	0.219	4.217	0.000	Accepted
H3	CMP→AC→ER	0.118	0.119	4.367	0.000	Partial mediation
H4	CCA→AC	0.438	0.442	7.789	0.000	Accepted
H5	CCA→ER	0.218	0.220	3.632	0.000	Accepted
H6	CCA→AC→ER	0.158	0.160	4.487	0.000	Partial mediation
H7	AC→ER	0.360	0.362	5.739	0.000	Accepted

Source: Primary data.

presents the results of the proposed hypotheses. The findings indicate that all the proposed Hypotheses (H1–H7), including the mediation hypotheses, are accepted, demonstrating the existence of partial mediation. Further elaboration on the hypotheses’ findings is found in the Discussion and Implications section.

As reported in

Table 8. Results of R² and F².

DV	R2	IV	F2	Effect Size
AC	0.413	CCA→AC	0.275	Intermediate
		CMP→AC	0.154	Intermediate
ER	0.431	AC→ER	0.134	Small to intermediate
		CCA→ER	0.055	Small
		CMP→ER	0.061	Small

Source: Primary data.

, the study’s model demonstrates strong explanatory power, with AC explaining 41.3% and ER explaining 43.1% of the variance in the independent variables. This indicates that the independent variables (CMP and CCA) are well-predicted [56]. Regarding the F² result, CCA exerts an intermediate influence on AC (0.275) and a negligible effect on ER (0.055). Similarly, CMP has an intermediate effect on AC (0.154) and a minor influence on ER (0.061). Finally, AC has a small to intermediate influence on ER, suggesting its significant role as a mediator in the model.

The findings in

Table 9. Variance inflation factor (VIF) result.

	VIF
AC→ER	1.703
CCA→AC	1.187
CCA→ER	1.514
CMP→AC	1.187
CMP→ER	1.370

Source: Primary data.

show that all reported values are below 5. Hence, the study model does not exhibit problematic multicollinearity, confirming that the regression estimates are reliable and stable and that no multicollinearity exists amongst the predictors [54]. Furthermore, to evaluate the predictive relevance of the model, a cross-validated redundancy measure (Q²) was employed. The reported findings show that AC (0.165) and ER (0.181), the key dependent variables, have positive Q² values, confirming their predictive relevance. The study also assessed potential bias using Harman’s single-factor test, with principal axis factoring as the method. The results indicate that the first factor accounts for 23.55% of the variance, which is below the 50% threshold, confirming that common method bias is unlikely to be an issue in the study [57]. Figure 2 shows the structural model of the study.

8. Discussion and Implications

8.1. Interpretation of Findings

As indicated earlier, the study developed seven hypotheses, including two mediation effects, to test and confirm the applicability of the proposed model. The results revealed several compelling findings. The study began with the first three hypotheses (H1–H3), which assumed a positive relationship between CMP and AC, between CMP and ER, and the mediating role of AC in the relationship between CMP and ER. The results confirmed that CMP positively and significantly influences AC (β = 0.327, p < 0.05), CMP positively and significantly influences ER (β = 0.218, p < 0.05), and AC can partially mediate the relationship between CMP and ER (β = 0.118, p < 0.05).

These findings indicate that MSEs with robust crisis management systems can better deal with and adapt to challenges and disruptions in their business environments. This aligns with the previous literature emphasizing the importance of preparedness, crisis planning, resource allocation, and development of contingency plans during crises; such strategies prepare individuals to handle crises and ensure business survival and readiness [10,25,58]. Crisis planning, management, and preparedness direct the behavior of individuals toward adaptation to changes in their surroundings. For example, entrepreneurs with significant work or management experience tend to develop the AC needed to navigate these changes [12]. Similar findings were reported by Herbane et al. (2004) [11], who confirmed that continuous training and adaptation before and during crises enhance businesses’ responsiveness and develop AC within organizations. This ultimately allows business owners to manage crises more efficiently. Furthermore, crisis preparedness and response can enhance business performance and survival during challenging times [10,40]. Although the direct hypotheses (H1 and H2) reported significantly positive results, the indirect assumption (H3) also reported the ability of AC to mediate the relationship between CMP and ER. CMP can directly and positively influence ER, with AC partially contributing to this process. This confirms AC’s importance in achieving ER amongst micro- and small-sized entrepreneurs. Specifically, entrepreneurs who know CMP and crisis planning principles can better develop AC behavior (adjustment behavior), allowing them to sense crises and effectively deal with them. Moreover, they can adjust and modify business processes, make sound decisions, design appropriate products and services for customers, and mitigate disruptions, thereby increasing confidence and self-efficacy. These abilities can ultimately strengthen their resilience, enabling them to face crises and recover from setbacks armed with effective management strategies. These results align with the previous research on this topic [12,17,42].

Furthermore, the study examined H4–H6. H4 proposed a positive relationship between CCA and AC, H5 proposed a positive connection between CCA and ER, and H6 assumed the ability of AC to mediate the relationship between CCA and ER. The findings approved these hypotheses with the following values: β = 0.438, p < 0.05 for H4; β = 0.218, p < 0.05 for H5; and β = 0.158, p < 0.05 for H6. These findings underscore the importance of CCA in building entrepreneurs’ AC. MSEs prioritizing customer needs and preferences develop adaptive structures and processes responsive to changing market conditions, enhancing customer loyalty and satisfaction, ensuring business continuity and long-term survival, and improving resilience during crises. Previous literature highlights that continuous market scanning, customer monitoring, loyalty cultivation amongst clients, and monitoring competitors’ prices positively contribute to developing AC [14,15]. This aligns with the findings of this research and highlights the importance of CCA, ER, and CCA in the sustainability, survival, and resilience efforts of MSEs.

The finding related to H6 also confirms that although CCA is important for enhancing ER directly, AC may also partially and indirectly contribute to ER development through CCA. Entrepreneurs who can understand their clients’ needs and adapt accordingly—by assessing requirements, analyzing competitors’ strategies, modifying their business models, prioritizing profitable clients over mass production, comprehending customer mobility, and anticipating customers’ feelings and concerns—can develop a more effective AC. This enables them to respond adeptly to customers’ needs, withstand internal and external pressures, and handle potential crises. These insights align with the previous literature on this topic [14,15,17,29,30].

Finally, H7, which assumed that AC can positively and significantly influence ER, was tested and confirmed (β = 0.360, p < 0.05). This result emphasizes the role of AC in building resilience amongst MSEs and entrepreneurs. Businesses with better AC can quickly reconfigure resources, processes, and strategies to handle uncertainties, thereby improving performance and resilience. The concept of resilience involves not only recovering from crises but also adjusting to uncertainties by being open to new approaches, staying resourceful, and maintaining flexibility—concepts discussed in the previous literature [1,10,14,44,48].

8.2. Theoretical Implications

This research provides new insights into the existing literature on ER, AC, CMP, and CCA. The study provides empirical evidence and extends the understanding of the role of CMP in enhancing AC and ER. It confirms that crisis planning and preparedness amongst MSEs play a significant role in strengthening the ability of micro- and small-sized entrepreneurs to adjust their business models to crises and environmental changes and respond effectively to disruptions. It also highlights the significance of proactive planning and risk management in developing resilient entrepreneurs capable of adapting to current situations. This study further highlights the role of customer-centricity and adaptability in enhancing entrepreneurs’ AC and ER. The findings also align with the literature on dynamic capabilities, recommending that customer-focused firms are better equipped to handle disruptions. The findings of this study also provide implications for the DCT by identifying CMP and CCA as dynamic capabilities that strengthen AC and ER. This research expands the scope of the DCT to the crisis context, demonstrating that CMP enables enterprises to navigate disruptions proactively. It also integrates CCA as a customer-focused dynamic capability that aligns with changing market needs. This study also accommodates AC as a mediator, explaining how dynamic capability translates into resilience. It also shows AC as a critical mechanism during CMP and ER, indicating how organizational capabilities translate into resilience. This finding also links the DCT with the literature on resilience by emphasizing that dynamic capabilities are about competitiveness and ensuring survival and recovery during crises. This research elucidates how firms build resilience in turbulent environments. Finally, the study contrasts the resource-based view (RBV) theory developed [59], which posits that an enterprise’s competitive advantage can be achieved by inimitable resources [60], with DCT. Although the RBV theory focuses on resource possession, the DCT extends this perspective by describing how businesses can reconfigure these resources in unstable environments [18]—a particularly relevant aspect in Yemen’s volatile context, characterized by inadequate institutional support and institutional voids. Accordingly, this research contributes to the DCT by exploring conflict-specific capability pathways and demonstrating how CMP and CCA serve as critical micro-foundations of dynamic capabilities in resource-scarce environments.

8.3. Practical Implications

This study offers essential guidelines for micro- and small-sized entrepreneurs to help them remain resilient and adaptable during crises and challenges. Given that these entrepreneurs often lack the resources and capability to handle crises, they must develop proactive risk plans, manage limited resources, and prepare for crises in advance. This preparation includes developing crisis management plans that outline potential key risks, such as supply chain disruptions and cash flow shortages, along with actionable responses. They must also create contingency plans and build a small emergency fund to cover unexpected expenses during crises, reducing vulnerability and enabling entrepreneurs to respond more effectively to disruptions. They can also expand their networks with suppliers, funding agencies, and developmental organizations that can support them financially and technically and provide them with the training necessary for crisis preparedness. Furthermore, as CCA has proved to play an effective role in enhancing ER and AC, entrepreneurs need to resort to tools such as customer feedback and data analytics to understand the preferences of changing customer needs. They must also develop flexible business models to adjust their products, services, and delivery methods quickly. They also need to prioritize customer satisfaction and loyalty, as these actions will help their business adapt quickly to customers’ needs. Micro- and small-sized entrepreneurs also need to build a culture of innovation and experimentation to develop new solutions and approaches, defeat other competitors, and develop a resilient mindset by learning from past challenges and viewing crises as opportunities for growth, in addition to searching for different income sources and reducing reliance on a single revenue source.

In the study context, policymakers are responsible for providing affordable training programs to assist MSEs in developing crisis management and customer-centric strategies that minimize the adverse effects of crises. Policymakers should also facilitate access to micro-grants or low-interest loans, which are essential [61] for building capabilities such as AC (e.g., investing in technology or employee training). Moreover, they should encourage the creation of local networks and partnerships, enabling MSEs to share knowledge, resources, and best practices.

Collaboration between policymakers and nongovernmental organizations could further strengthen MSEs, particularly in Yemen, by promoting offline-capable mobile banking and fintech tools to facilitate crisis financing. Policymakers are also advised to follow successful strategies implemented elsewhere, such as initiatives led by Saudi Monsha’at to support MSEs during crises like COVID-19. They should also develop comprehensive long-term plans, such as Saudi Vision 2030, to support MSEs and ensure their survival and success, particularly during crises and challenges.

9. Conclusions, Limitations, and Future Research Directions

MSEs play a key role in developing the economy, creating job opportunities, reducing poverty, and enabling micro- and small-sized entrepreneurs to generate income and strengthen their self-reliance. However, their continuity, survival, and resilience have been serious matters brought into discussion by academics and policymakers. This study is an attempt to explore key factors, namely, CMP and CCA, which may contribute to strengthening MSEs’ AC and ER during crises and challenges, particularly in developing countries. To achieve this, this study collected a sample of 301 MSEs operating in various locations of Sanaa City in Yemen using convenience and snowball sampling to ensure better reachability of the respondents. Notable findings include that CMP and CCA positively predict AC and ER. It also revealed that AC can positively and significantly mediate the relationship between CMP and CCA to ER. This study confirms that CMP and CCA enhance ER amongst micro- and small-sized entrepreneurs. It emphasizes the need for policymakers to provide the necessary support for entrepreneurs to deal with crises and disruptions to allow their continuity and survival.

The researcher acknowledges some limitations of this research, including convenience and snowball sampling type being nonprobability sampling, which may limit the generalizability of the findings. Moreover, the researcher admits that some AVE values of the study constructs fell slightly below 0.5. However, other validity metrics met the thresholds, recommending potential for optimization of the scales used in future research.

Although data collection was conducted in Sanaa City, the capital of Yemen and home to most of the MSEs, this study may not comprehensively cover the whole country, potentially limiting its generalizability. Accordingly, this research recommends expanding the study’s context; increasing the sample size; adopting random sampling methods; and incorporating various constructs, mediators, and moderators, such as business learning, to investigate the broader factors influencing MSE resilience and capacity. Future studies may also investigate how culture and role models support the continuity and adaptability of micro- and small-sized entrepreneurs during crises.