Linking strategic leadership to innovation and competitive advantage: The roles of strategic choices and organizational culture in SMEs

The study investigates the roles of strategic leadership, strategic choices, and the competing values framework in shaping the performance of small and medium-sized enterprises (SME). A parallel mediation model is proposed, identifying competitive and cooperative strategies as key mechanisms through which strategic leadership influences organizational outcomes, specifically competitive advantage and open innovation. The competing values framework, encompassing clan and market cultures, is introduced as a moderating factor to assess its impact on the adoption of cooperative and competitive strategies, respectively. The theoretical foundation of the research is grounded in the resource-based view, knowledge-based view, and dynamic capabilities theory. Data were collected using a time-lagged survey from 375 middle and senior managers across SMEs in major cities of Pakistan. The findings reveal that both cooperative and competitive strategies significantly mediate the relationship between strategic leadership and outcome (competitive advantage and open innovation). Regarding the moderation effects, results were mixed: Clan culture significantly moderated the relationship between strategic leadership and cooperative strategy, enhancing the relationship at higher levels of clan culture. However, market culture did not moderate the relationship between strategic leadership and competitive strategy. The study offers valuable insights into the application of strategic leadership and the cultural contingencies that influence SMEs’ performance, thereby contributing to both theory and practice.