Driving SME performance through technological absorptive capacity and e-business innovation

Abstract

This study examined the relationship between technological absorptive capacity and the business performance of small and medium-sized enterprises (SMEs), as well as the mediating effect of e-business innovation. Based on data obtained from 179 sunflower oil-processing SMEs in Tanzania and analyzed using partial least squares structural equation modeling, the study established that technological absorptive capacity influences business performance. Further, e-business innovation partially mediates the relationship between technological absorptive capacity and business performance. These findings suggest that technological absorptive capacity indirectly influences SME performance through e-business innovation. On the other hand, findings from the multigroup analysis revealed insignificant differences in the hypothesized relationships between samples from Dodoma and Singida regions, with greater effects observed in Dodoma than in Singida for most of the relationships. The mediating effect of e-business innovation is more profound in the Dodoma sample than in the Singida sample. This study provides important empirical evidence of the role of technological absorptive capacity and e-business innovation in enhancing SME performance. Additionally, evidence from cross-regional comparisons is crucial for examining differences in business performance among SMEs operating in the country. This study has some implications for business managers, governments, policymakers, and academics.