The internal and external effect of environmental complexity on business responses: a PLS-SEM and artificial neural network approach

Purpose In the wake of severe socio-economic damage, many firms have made creative and technological progress in their responses to the COVID-19 crisis. This paper examines internal and external environmental complexity elements as antecedents of business responses and builds a framework for tourism firms to respond to the pandemic crisis. Design/methodology/approach This study obtained survey data from 395 respondents in the Vietnamese tourism and hospitality industry. A partial least squares structural equation modeling–artificial neural network approach was used to examine various combinations of internal and external environmental complexity elements that have different impacts on business responses and firms' performance. Findings The knowledge and practice created by the firm's employees (individual creativity), obtained from traditional contexts (traditionality) were identified as internal environmental complexity factors while practice learned from other firms (mimetic pressure), information processing (status certainty) and digital transformation (digital technology speed) were treated as external environmental complexity factors. Internal and external environmental complexity factors influence business responses and firms' performance positively but differently. Practical implications This study demonstrates that firms should integrate their internal environment of creativity and traditionality with external environmental factors of mimetic pressure, status certainty and digital technology speed to create better business responses, and thus firm performance in the COVID-19 era. Originality/value This investigation contributes to environmental research and narrows the existing research gap relating to the association between types of environmental complexity and firms' responsive action, which then influence firms' performance in terms of sustainable competitiveness.