The impact of product innovation and service quality on survival recovery of msmes: the mediating role of financial performance

Introduction: The innovation business model explores the development of micro, small, and medium enterprises (MSMEs) in Indonesia between two time periods. In describing the condition of MSMEs, those who regulate MSMEs and policymakers in general are expected to help small and medium-sized enterprises improve service quality and product innovation for performance during the pandemic. Methods: This study employs a quantitative and purposive sampling approach based on a questionnaire disseminated to MSMEs in Indonesia as the research object. Data analysis was conducted using Stata version 17 for multiple linear regression analysis and the classic assumption test with 218 respondents. There are two time periods, namely before 2019–2020 and during the COVID-19 pandemic in 2021–2022. Before and during the pandemic, the innovation business model of service quality and product innovation had a positive influence on MSMEs' performance in Indonesia. Results: This became clear when we compared the quality of service, product innovation, and customer loyalty separately, contrasting the regression results of the circumstances before and during the pandemic and their impact on Indonesian MSMEs. A service quality approach (SERVQUAL) was adopted to measure service quality, which discusses five quality aspects: tangibility, reliability, responsiveness, assurance, and empathy. Conclusions: This approach bears similarities to product innovation and performance variables, whose analyses parallel those of the quality-of-service variable.