The Financial Resilience Pathway: How Budgeting Discipline and Working Capital Efficiency Drive Sustainable MSME Growth
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Abstract
Micro, small, and medium enterprises (MSMEs) often pursue growth while facing financial vulnerability due to limited liquidity, informal financial planning, and inefficient working capital management. Although budgeting discipline, working capital efficiency, and financial resilience have been individually linked to firm performance, limited studies explain how these capabilities interact sequentially to support sustainable MSME growth. This study develops and examines the Financial Resilience Pathway, explaining how budgeting discipline contributes to sustainable growth through working capital efficiency and financial resilience. Using a quantitative explanatory design, this study surveyed 312 MSMEs in Garut Regency, Indonesia. Data were collected from owners and managers responsible for financial decisions and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) with SmartPLS 4. The results show that budgeting discipline positively affects working capital efficiency, financial resilience, and sustainable MSME growth. Working capital efficiency enhances both financial resilience and growth, while financial resilience is a significant predictor of sustainable growth. Mediation analysis confirms that working capital efficiency and financial resilience transmit the effect of budgeting discipline on growth through a significant serial pathway. This study extends Resource Orchestration Theory by demonstrating how MSMEs structure, bundle, and leverage financial resources through sequential capability development. The findings provide practical implications through the B-RIDGE framework for strengthening financial management and sustainable MSME expansion.
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