Irrationality and economic morality of SMEs’ behavior during the Covid-19 pandemic: lesson from Indonesia

Abstract

The Covid-19 pandemic provides severe consequences of economic behavior as an increase of unemployment rates, and providing a new business creation can continue the economic activities. This study explores a functional relationship between irrational behavior, which proxied by loss aversion, the endowment effect, and herd behavior toward the morality of economic among small and medium enterprises (SMEs), as well as the mediating role of altruism in the perspectives of behavioral economics. The research involved a quantitative survey and cross-sectional data with a sample of 288 SMEs in East Java of Indonesia. Using structural equation modeling, the findings reveal that the endowment effect and herd behavior have a robust relationship with economic morality. This study also notes that altruism has a positive link with economic morality, and it has successfully mediated the irrational behavior of SMEs in Indonesia. In addition, the marketing strategy also distinguishes altruism's impact on morality economic.

The Impact of Trust, Knowledge Sharing, and Affective Commitment on SME Innovation Performance

“…Most of them believe that their customers buy continuously as a result of their loyalty to existing products. Still, in the end, they did not realise that not doing innovation will result in customers loss, and it is difficult to add new customers (Hadi Putra & Santoso, 2020;Wahyono et al, 2021). In this case, Hidayat et al ( 2021) argued that the human resources aspects play a crucial role in enhancing business continuity.…”

Young Coconut Trader Marketing Strategy During the Pandemic

“…Therefore, the presence of technology as a transverse axis in all economic sectors requires the worlds to change management techniques and accept digital transformations that affect the organization and its industrial structure [2]. Because Covid-19 endemics have serious economic consequences, including a rise in the number of people dying, in the jobless rate and provides the creation of new businesses that can continue economic activity [3]. Indonesia, as a tropical country, has a large coconut production potential.…”

"Not a lot of benefits, but you can survive”, the role of technology in micro business resilience during the Covid-19 pandemic

“…business activities (Gao, 2022) . In addition, covid-19 has had an impact on work termination, and an increase in the number of unemployed (Wahyono et al, 2021)(Hadi Putra & Santoso, 2020. The closure of business activities occurred in all regions of Indonesia, including the city of Padang, which had an impact on the national economy.…”