Entrepreneurial Orientation and Performance Outcomes in Palestinian SMEs: The Role of Absorptive Capacity and Industry Type

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Entrepreneurship lies at the heart of Small and Medium Enterprises, serving as the driving force behind their inception and development. By examining the mediating role of absorptive capacity and the moderating effect of industry type, this paper looks at how an entrepreneurial orientation affects business sustainability performance, knowledge management capacity, and innovation performance. This study will examine this critical role played by entrepreneurial orientation in SMEs’ success in a competitive business environment. A quantitative research method was used with questionnaires sent to 303 manufacturing SME owners or managers in the North West bank of Palestine. The demographic background of the participants was varied, and contributed to this diverse description of the manufacturing sector. The hypothesized relationships were tested using PLS structural equation modeling. The research findings indicate that entrepreneurial orientation influences absorptive capacity, business sustainability performance, and knowledge management capacity and innovation performance directly and significantly. These findings were consistent with the study’s hypothesis that absorptive capacity mediates the relationship between entrepreneurial orientation and both business sustainability performance and knowledge management capability, as well as innovation performance. Furthermore, the nature of the industry influences the relationship between absorptive capacity and business sustainability performance. This research is original and of great value because it relies on the managers’ knowledge about the application of entrepreneurial orientation in order to improve the results of SMEs. Since the appropriate moderating variables differ across industry types, it may be best for each industry to develop industry-specific benchmarks and standards for industry-level business sustainability performance that the SMEs can use to see what pertains to them and what are the opportunities, and then compare the success of this industry to what they are in.