Abstract
This paper investigates a model of SME performance based on the dimensions of entrepreneurial orientation and absorptive capacity of the firm. The model tested the direct effects of innovativeness, risk-taking and proactiveness on firm performance and the moderating role of absorptive capacity on the relationship between the dimensions of entrepreneurial orientation and firm performance. Structural equation modelling with multi group analysis was used to test the model in the context of small and medium scale hotel and restaurant industry in Sri Lanka. Results indicate that highly entrepreneurial-oriented SMEs with high level of absorptive capacity achieve higher level of performance.
Highlights
And constantly performing Small and Medium scale Enterprises (SME) sector is one of the most significant features of the countries that had achieved high level of development
The current study argued that the dimensions of entrepreneurial orientation as a strategic orientation would be a good predictor variable to the firm performance
The results imply that being proactive, innovative, and inclined to take risk were more important in achieving firm performance
Summary
And constantly performing Small and Medium scale Enterprises (SME) sector is one of the most significant features of the countries that had achieved high level of development. An impressive empirical support has been received for their importance to those countries that are in a continuous struggle to achieve their socio-economic developmental targets (Subhan, Mehmood, & Sattar, 2013; Asian Productivity organization, 2011). Due to their utmost importance, performance of SME has been the focus of many prior researchers making it one of the most widely used construct as a dependent variable
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