Influence of innovation on the relationship between market orientation, entrepreneurial orientation, and SME performance in Pakistan

Abstract

Small and medium-sized firms (SMEs) are important in enhancing the economy, driving innovation, and enhancing competitiveness. Consequently, they play a substantial role in enhancing the overall operational efficacy of enterprises. The primary objective of this study was to investigate the impact of market orientation and entrepreneurial orientation on small and medium-sized enterprises (SMEs) operating in the Pakistani manufacturing sector. Additionally, the study sought to determine the mediating effect of innovation in the link between these orientations and SME performance. Data was collected from 381 small and medium-sized enterprises (SMEs) operating in Pakistan using a self-administered questionnaire. Out of the total surveys collected, 360 met the criteria for conducting a detailed analysis. The study utilized a structured equation modelling technique by SMART PLS 4 to evaluate the influence of Market Orientation (MO), Entrepreneurial Orientation (EO), and Innovation (INO) on the performance of Small and Medium Enterprises (SMEs). The findings of the study demonstrated a notable association between Market Orientation (MO), Entrepreneurial Orientation (EO), and Firm Performance (FP), wherein innovation played a crucial intermediary function within this framework. The aforementioned findings highlight the significant significance of market orientation (MO), entrepreneurial orientation (EO), and innovation orientation (INO) in the attainment of success for small and medium-sized enterprises (SMEs). This study serves as a significant reference for both scholars and practitioners who are interested in gaining a deeper understanding of the effects of market orientation (MO), entrepreneurial orientation (EO), and innovation orientation (INO) on the performance of small and medium-sized enterprises (SMEs). Therefore, this study makes a valuable contribution to the existing body of knowledge in the field, enhancing our comprehension of the topic.