Relationship Between Market Orientation and SMEs Innovation Performance: Role of Absorptive Capacity and Openness

Abstract

The study was founded on three main objectives. The study looked at the direct relationship between market orientation and the innovation performance of SMEs. It also assessed how absorptive capacity mediated the direct relationship between market orientation and the innovation performance of SMEs. Lastly, the study assessed the moderating role of openness on the effect of market orientation and absorptive capacity of SMEs. Results were founded on 418 Ghanaian SMEs. The reliability and validity analyses were conducted before the actual path estimations Structural Equation Modelling in Amos (v.23). This study concluded that marketing orientation had a significant positive relationship with the innovation performance of SMEs, and the relationship between market orientation and SMEs’ innovation performance was partially mediated by the effect of the absorptive capacity of SMEs. The relationship between market orientation and innovation performance of SMEs could thus be direct or mediated through absorptive capacity. Finally, the study concluded that the effect of market orientation on absorptive capacity was moderated by openness. Market-oriented SMEs with an innovation openness strategy can achieve higher absorptive capacity. It was recommended that SMEs seeking to achieve innovation performance must invest in understanding the market in which they operate. This includes understanding the customers and competitors. The various units in the organization must also integrate to enhance the smooth sharing of innovation knowledge. Organizational performance measures such as innovation are very critical for the survival of firms in this age of COVID-19 pandemic when even giant firms are running into losses and folding up.