SMEs Combating Turbulence: Examining the Role of Pricing Capability in Mitigating Market Turbulence and Improving Business Performance

Abstract

Although competitor and customer have emerged as strategic components of a market-focused approach for performance enhancement, research on the function of organizational capabilities mechanism remains scarce. This research intends to develop a conceptual framework focusing on how competitor orientation (COMPO) and customer orientation (CUSTO) influence business performance (BP) both directly and indirectly through pricing capability (PC). The interaction effects of COMPO and CUSTO on PC and the moderating function of market turbulence (MT) on the PC-BP link are also studied. Partial least square structural equation modeling was applied to analyze survey data from 227 Indian small and medium-sized enterprises (SMEs) functioning in diverse manufacturing industries. The empirical findings indicate: first, COMPO and CUSTO are positively related to PC. Second, COMPO and CUSTO have a positive interaction influence on PC. Third, COMPO has both indirect and direct impacts on BP through PC. Fourth, MT strengthens the positive relationship between PC and BP. Last, CUSTO has a stronger positive effect on PC than COMPO. These findings inform SME managers about the importance of PC mechanism through which COMPO and CUSTO generate superior BP even in the presence of a high MT.