“…Whereas, absorptive capacity refers to the capability of SMEs capability to assimilate, value, and apply knowledge gain from external environment and leverage the knowledge in a productive manner (Limaj & Bernroider, 2017). However, most studies on absorptive capacity related with the large organizations, and less studies were conducted in the SMEs context (Becheikh, 2013;Guo & Wang, 2014;Tzokas et al, 2015, Rodríguez-Serrano & Martín-Armario, 2017. Hence, the objective of this research paper is to identify the effect of innovation capability and absorptive capacity on SMEs performance in the context of Pakistan.…”