Product Innovation: A Mediator Between Entrepreneurial Orientation, Knowledge Management, and Performance of SMEs

Businesses across the globe have emphasized over the importance of knowledge management in boosting novelty and innovation in products and services. However, small and medium enterprises are hesitant in product innovation, particularly in developing nations or low-income countries due to resource constraints, which retards performance. Therefore, the objective of the study is to analyse the mediating role of product innovation for achieving superior performance of SMEs through entrepreneurial orientation and knowledge management. This study concentrates especially on small- and medium-sized enterprises in Pakistan. The study is based on primary research, and the data has been collected by applying simple random sampling with the aid of adopted questionnaires. The research hypothesis and the framework have been developed with the support of knowledge-based view, resource-based view, and contingency theory. For testing the hypotheses, the researchers used the structural equation modelling technique. The developed hypotheses were confirmed by the findings drawn from a sample of 384 small and medium enterprises. Open innovation has been identified as a significant mediator between entrepreneurial orientation and performance of small and medium enterprises along with knowledge management and performance of small and medium enterprises. The findings have great significance, since they show that product innovation requires knowledge management as alone entrepreneurial orientation is insufficient. By using the resource-based view, knowledge-based view, and contingency theory, the study on product innovation to boost the performance of small and medium enterprises has been conducted while catering the factors that influence product innovation. The study differs from the prior studies because product innovation in developing countries has hardly gained importance; secondly, linking the three theoretical underpinnings in one single framework is the major contribution, as the study shows that to boost performance, the three theories complement each other to boost the performance of small and medium enterprises.