Journal of the Knowledge Economy

https://doi.org/10.1007/s13132-022-01004-y

How Small and Medium Enterprises Achieve Innovation

Performance? An Investigation of Influential Factors

Zahid Yousaf1 · Mosab I. Tabash2 · Abdelmohsen A. Nassani3 ·

Mohamed Haffar4

Received: 28 July 2021 / Accepted: 6 March 2022

© The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature
2022

Abstract
The study in hand investigated the innovation performance (IP) of SMEs explaining
the role of digital platforms (DPs), innovation strategy (IS), and innovation culture
(IC). In the current study, we also tested the intervening role of IC. A total of 387
top management officials served in SMEs were approached for the purpose of data
collection. For the purpose of data analysis, SPSS 25.0 and various statistical tech-
niques were used for analysis. Results revealed that DPs significantly predicted IC
and IP of SMEs. Moreover, the outcomes of analysis also revealed that IC plays a
mediating role between DPs and IP. The SMEs of developing economies contribute
significantly, however operating in a dynamic scenario which demanded continuous
innovation in the business operation of the business entities. Only those businesses
survive in the dynamic environment which updates its operation, methods, and prod-
ucts according to customers’ demand. Hence, IP becomes critical for SMEs to flour-
ish the business activities. Therefore, the current research endeavor highlights the
role of DPs, IC, and IS on innovation activities of SMEs.

Keywords Innovation performance · Digital platforms · Innovation strategy ·

Innovation culture

Introduction

In today’s modern era, the notion of organizational innovativeness has gain the
attention of management and researchers (Lin et al., 2020). Due to the emergence
of advanced technologies, dynamic environment and transform business methods
exert pressures on business organizations to become innovative in business pro-
cesses and techniques (Lestari et al., 2020). Traditional business economy has been

* Zahid Yousaf
[email protected]
Extended author information available on the last page of the article

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changed into modern economy due to the emergence of innovation (Bukht & Heeks,
2017), and this transformation is the outcomes of advanced technologies (Fichman
et al., 2014). However, business organizations made efforts to cope with uncer-
tain business environment for survival (Curado et al., 2018). Under these circum-
stances, innovation cannot be neglected due to the influencing role in leading busi-
ness towards success, creation, and high performance (Boganini & Casazza, 2017).
In this regard, all kinds of business organization and more specifically the SMEs
face these emerging challenges due to resource constraints. Involvement of business
organization in innovation-related activities signifies a real challenge for all kinds
of commercial landscape including SMEs (Curado et al., 2018). Transformations of
business economy offer challenges as well as opportunities for SMEs largely based
on how these SMEs respond to the situation and how strategically tackle the emerg-
ing scenario. SMEs critically need the innovation in its operational activities and
business methods in order to improve their IP (Lee & Kim, 2020). To enhance the
innovation activity management of SMEs, they strategically improve the technologi-
cal infrastructure and make efforts to develop DPs to cope with changing environ-
ment by using the existing resources.
DPs gain critical importance for the survival of business organization as these
platforms contribute to provide updated information necessary to respond to the
challenges that occurred due to technological advancement (Cenamor et al., 2019).
DPs of an organization based on various technologies allow for the editing, stand-
ardizing, and distributing of internal and external data required for the operation
of business innovation activities (Parker et al., 2016; Williamson, 2021). DPs are
critical for the business organizations as these platforms help out for gaining com-
petitiveness. DPs play imperative role for the process of innovation by disseminating
valuable information among the various operational units (Cenamor et al., 2017).
With the help of DPs, organizations are able to create new ideas to modernize their
product/services, which improve the IP (Freixanet et al., 2021). Existing studies sug-
gested various outcomes of DPs, i.e., network capability (Cenamor et al., 2019),
improvisation capability (Jun et al., 2021), and creativity (Matarazzo et al., 2021).
However, the important aspect, i.e., DPs in terms of IC and IP, has been ignored so
far. In this research, we have measured DPs as a favorable influencer that enables a
firm for great success in terms of their IP (Jun et al., 2021).
This research was conducted to explore DPs, one of the important factors for
the improvement of IP of SMEs of Pakistan in support of IC. The role of DPs for
the improvement of organizational IP has been discussed in the existing literature
(Scuotto et al., 2017). DPs are critical but not the sole factor that triggers the innova-
tion process of an organization. Therefore, the study in hand is an attempt to exam-
ine the role of IC as a mediator between DPs and IP.
Lee and Kim (2020) argued that innovation activities of an organization are
largely based on receiving and disseminating valuable information among vari-
ous organizational players. In this regard, IC plays an important role for the IP
by providing infrastructure for exploring novel information and knowledge which
provide foundation for innovation (Naranjo-Valencia et al., 2010). Most of the
existing studies found positive association between IC and IP of business organi-
zation (Ghasemzadeh et al., 2019). IC provides infrastructure for exploring new

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knowledge for renovate product and service, which ultimately acts as connection
between DPs and IP. Moreover, organizations with IS are more inclined towards
innovation activities and improve their IP. Through IS organizations acquired
information regarding the competitors, market, suppliers, and customers (Raza
et al., 2018). Information gained with the help of IS act as input for the innova-
tion relating decision (Borjesson & Lofsten, 2012). Existing researchers deliber-
ated on the role of IS and presented various outcomes; however, limited studies
considered the moderating role of IS in the context of IP.
The basic aim of the current research was to discuss the role of DPs for IC and
IP. Beyond the direct effect of DPs on IC and IP, the current study also tested the
mediation effect of IC on DPs and IP link. Furthermore, in the current research,
we also considered the moderating effect of IS. The next section provides in-
depth literature and development of hypotheses regarding the study constructs.
Moreover, the process of data collection, various measurement and analysis tech-
niques, results, discussion, and conclusion are discussed in the subsequent part
of the manuscript. The last part contained theoretical and practical implications.

Literature Review

Digital Platforms and IP

Digital technologies gain critical importance for the operational activities due
to the emergence of digitalization (Frishammar et al., 2018; Giotopoulos et al.,
2017; Viglia et al., 2018). Williams et al. (2009) documented that digital tech-
nologies allow the business organizations to rapidly receive, store, and distribute
innovation-related knowledge for implementation of novelty. Mikalef and Pateli
(2017) suggested that DPs contribute to organize organizational information
and communication-related technologies. DPs allow organizations to assimilate
dynamic knowledge from business partners in order to respond market demands
(Helfat & Raubitschek, 2018; Teece, 2018). DPs allow organizations to improve
their coordination and combination both internally and externally (Giotopoulos
et al., 2017). Specifically, DPs facilitate for the integration of information among
various players within an organization (Dominguez Gonzalez & Massaroli de
Melo, 2018).
Scuotto et al. (2017) documented that innovation-related activities of an organ-
ization are concerned with the acquisition of innovation-related information from
various resources. DPs allow the organization to receive extended knowledge, which
play foundational role for the improvement of innovation ideas which contribute for
the transformation of organizational products and processes (Jun et al., 2021; Zeng
et al., 2010). Organizations having DPs are in a better position to create and for-
mulate novel ideas required for the successful implementation of innovation-related
practices (Jun et al., 2021), which ultimately improve the IP. In line with these argu-
ments, we formulate:
H1: Digital platforms significantly predict IP.

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Digital Platforms and IC

As DPs play foundational role for the acquisition of valuable information and
knowledge about the external and internal resources (Yunis et al., 2018), IC is based
on beliefs and shared values that support for the exploitation of assimilated knowl-
edge (Sattayaraksa & Boon-Itt, 2016). DPs are critical to extend knowledge neces-
sary to develop IC within an organization. Aksoy (2017) found that organizations
with advanced technologies for the formulation and integration of information about
competitors, markets customers, and suppliers are more inclined towards innovation
activities. DPs allow organizations for the exchange of required information which
allow the organizational members to discover innovative ways to fulfill the custom-
ers’ demands (Pesce et al., 2019; Vey et al., 2017). Fitzgerald et al. (2014) argued
that IC within an organization is largely based on the sound technological resources
which help them to assimilate required information from external partners. There-
fore, the current study formulated that:
H2: DPs positively predict IC.

IC and IP

Empirical findings of the existing studies suggested that organizations with IC

have successful experience for the formulation and implementation of their inno-
vation relating activities which help them to achieved IP (Globocnik et al., 2020;
Pesce et al., 2019; Naranjo-Valencia et al., 2010). Therefore, IC provides founda-
tion through which information and knowledge can be accumulated by organiza-
tional members to explore new opportunities for doing their businesses innovatively
(Lijauco et al., 2020). On the other hand, IP of an organization is concerned with the
frequency of discovering new methods in order to change the businesses products
and processes (Ghasemaghaei & Calic, 2020). IC plays an important role for improv-
ing the IP of organizations by enabling them to apply new knowledge to accomplish
innovation (Aksoy, 2017). Padilha and Gomes (2016) found that organizations with
cultures that facilitate for the assimilation of information from business partners are
more likely to engage in innovation activities and improve IP with the help of this
kind of culture. IC provides foundation for the advancement of innovative behavior
and innovation activities (Chen et al., 2018; Ghasemzadeh et al., 2019).
H3: IC positively predicts IP

Innovation Strategy as Mediator

DPs which are established with the help of latest technology provide foundation
for the acquisition and dissemination of innovation-related information among
the organizational members (Kazan et al., 2018). On the other hand, IC facilitates

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business organization to explore and exploit new opportunities based on acquired

knowledge and information for formulation of innovation-related practices mainly
depending on DPs. DPs provide basic foundation for the exchange of required
information among organizational members, i.e., needed to execute novel ideas
(Cenamor et al., 2019). In this research, we suggested that IC acts as a mediator
between DPs and IP link. In the era of digitalization and dynamic business envi-
ronment, all kinds of business organizations which established DPs and advanced
means of communication through latest technologies become the source of devel-
oping of IC (Fitzgerald et al., 2014).
IC is the outcome of DPs and various communication means allow the business
organization to utilize the acquired information for the promotion of IP through the
transformation of business operational models, products, services, and processes
(Aksoy, 2017). The DPs become a source of getting vital information from various
sources (Aksoy, 2017). The business interactions with stakeholders through DPs are
more likely to enhance IC to accomplish the IP. DPs are critical for the business organi-
zation to build-up associations for the formulation of new ways for business operations,
necessary for attaining IP (Jun et al., 2021). In line with these arguments, we proposed
that DPs play an important role for developing IC which in turn improve the IP of busi-
ness organization.
H4: IC acts as mediator between DPs- IP links.

Moderating Role of Innovation Strategy

IS refers as the mechanism for deploying existing resources for the successful
business operation in unreliable and dynamic environment which enable the firms
to move forward and become innovative (Tidd & Bessant, 2014). IS significantly
contributes for the expansion of business future strategies regarding innovation
and facilitates the firms to align their existing resources with changing circum-
stances (Hanifah et al., 2019). Previous findings of the studies revealed that IC is
critical for the IS of an organization (e.g., O’Regan et al., 2006; Terziovski, 2010).
Sound IS of an organization strengthens the link of IC and IP. The IC has a key
effect on the formulation, implementation, and execution of innovation-related
activities, which ultimately leads organization towards IP (Tagnizadeh et al.,
2016). The current study proposed strengthen role of IS for the IC and IP links.
IS supports the business organization to take up innovative activities in order to
improve the IP.
H5: The relationship between innovation culture and IP is strengthened by IS.

Theoretical Framework

Figure 1 presents the directions of relationships among study constructs. In the current,
we used four variables, i.e., DPs, IC, IS, and IP.

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Fig. 1  Theoretical framework

Methodology

Data Collection and Participants

The current study was conducted on SMEs registered and operating under the
SMEDA of Pakistan. Cross-sectional design was applied to approach the study
participants and elaborates the empirical findings based on various analysis tech-
niques performed on the collected data from owner/managers of SMEs. Initially,
509 SMEs were approached and received consent from the owner/managers for
their participation in the current research. Questionnaires were sent to the agreed
participants for the collection of data on study constructs. Only 387 question-
naires were received back from the respondents.

Measurement

Adapted questionnaires were used for the purpose of data collection. Table 1 pre-
sent the items and reliability characteristics of the study measurements.

Table 1  Discriminant validity of Items Cronbach’s Composite AVE

construct alpha reliability

DPs 8 0.79 0.84 0.69

IC 6 0.80 0.86 0.73
IS 9 0.82 0.91 0.75
IP 11 0.87 0.88 0.70

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Digital Platforms

DPs measured with the help of an 8-item scale formulated by Rai and Tang (2010).
The Cronbach alpha value for the DPs measurement scale was 0.79.

Innovation Culture

The respondent’s response regrading IC was recorded with the help of a six-item
scale developed and formulated by Terziovski (2010). The construct of IC generates
Cronbach alpha 0.80 for the current study.

Innovation Performance

IP was measured with an 11-items scale previously used Alegre and Chiva (2008),
adapted for the current study to measure the construct of IP. Cronbach’s alpha value
for the IP scale was 0.87.

Innovation Strategy

Moderating variable IS was measured with a 9-item scale developed and formulated
by Terziovski (2010). The measurement of IS adapted for the current study gener-
ated Cronbach alpha 0.82.

Results and Analysis

Collected data were analyzed using various statistical techniques, i.e., descriptive
statistics, correlation, and SEM. The outcomes of correlation analysis show the
association among study constructs, while direction, significance, and dependency
among the study constructs were found using the path analysis. Furthermore, to find
out the effect of IC as mediator, we used “Process” approach suggested by Preacher
and Hayes (2008). Beyond testing the direct and indirect effect, discriminate validity
was also confirmed with the help of Fornell and Lacker’s approach (1981). Further-
more, model fitness was confirmed by conducting CFA.
The outcomes of reliability and validity were at satisfactory level as shown in the
Table 1. The coefficients of convergent validity, construct reliability (CR), and dis-
criminate validity were met the criteria and threshold value.
For testing the model fitness in the current study, we construct four different mod-
els with different configurations. The findings of CFA are depicted in Table 2. The
findings shown in Table 2 for four different models revealed that only a 4-factor
model was fitted to the data.

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Table 2  Outcomes of CFA

χ2 df χ2/df RMESA GFI CFI

Model (with 4 factors) 1021.34 390 2.619 0.06 0.91 0.92

Model (with 3 factors) 1174.65 360 3.263 0.15 0.88 0.89
Model (with 2 factors) 1244.58 310 4.015 0.22 0.71 0.72
Model (with single factor) 1236.21 290 4.263 0.26 0.64 0.65

Correlation

The findings of correlation and descriptive statistics were presented (Table 3). The
outcomes of correlation confirmed the connection among study variables. The cor-
relation coefficients (0.32**) confirmed the significant relationship between DPs
and IC. Furthermore, correlation coefficients 0.30** and 0.23** also confirmed that
IC has positive association, IP, and innovation strategy, respectively. Finally, the cor-
relation coefficients (0.17) revealed that IS has positive relationship with IP.

Hypothesis Testing

The study hypotheses were tested using the statistical procedure of SEM. To test the
direct effect of DPs on IC and IP, and direct effect of IC on IP, we conducted path
analysis using SEM. The outcomes of path analysis confirmed all the direct effects
established for the current study. The coefficients obtained through the procedure of
path analysis are depicted in Table 4 of the study. The beta value (0.22**) generated
for the direct path of DPs and IP confirmed that DPs significantly predict the IP.
Therefore, study H1 was accepted. The beta value (0.33**) generated for the direct
path of DPs and IC confirmed that DPs significantly predict the IC. Therefore, study
H2 was accepted. The beta value (0.32**) generated for the direct path of IC and IP
confirmed that IC significantly predicts the IP. Therefore, study H3 was accepted.

Table 3  Descriptive statistics and correlation

Mean SD a b c d e f g h

a. Gender 0.9 0.81 1

b. Age 33 –- 0.09 1
c. Work experience 2.9 0.84 0.08 0.03 1
d. Education level 2.4 0.91 0.06 0.05 0.04 1
e. DPs 3.8 0.93 0.09 0.12* 0.08 0.07 1
f. IC 3.5 0.91 0.05 0.09 0.04 0.05 0.32** 1
g. IP 3.9 0.95 0.03 0.07 0.06 0.09 0.21* 0.30** 1
h. IS 3.6 0.90 0.08 0.03 0.04 0.09 0.25** 0.23* 0.17* 1

SD, standard deviation

* <0.001; ** <0.005

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Table 4  Path analysis

Paths Direction Beta Remarks

(H1) Digital platformsinnovation performance + 0.22** Confirmed

(H2) Digital platformsinnovation culture + 0.33** Confirmed
(H3) Innovation cultureinnovation performance + 0.32** Confirmed

** <0.005

Mediating Role of IC Between DPs and IP

For testing the mediation of IC between DPs and IP links, we conducted the
Preacher and Hayes’s (2008) approach. The outcomes of mediation analysis are
depicted in Table 5. The findings shown in Table 5 confirmed the significant
mediating role of IC. The coefficients, i.e., beta = 0.1347, lower value = 0.1649,
upper value = 0.2109, revealed that IC mediated between the DPs and IP links.
Therefore, study H5 was accepted.

Moderating Role of Innovation Strategy on IC and IP Link

To find out the moderation effect of IS, we conduct hierarchical regression. The
conclusions of hierarchical regression procedure are depicted in Table 6. Step 1
contains the coefficients of base model Furthermore, the coefficients shown in
step 2 confirmed the moderation IS on the connection between IC and IP. Coef-
ficient of the interaction term, i.e., IC × IS (β = 0.24, p < 0.01), revealed that IS
significantly moderates on the IC and IP link. Moreover, slop analysis suggested
was also conducted to highlight the moderating effect of IS which shows that IC
increases IP in the existence of IS (see Fig. 2).

Discussion

The findings revealed that DPs directly influence the IC and IP of SMEs. DPs
play foundational role for the development of IC through which organization are
able to involve in innovation-related activities to improve their IP.
In order to accomplish the objectives, we have formulated five hypotheses for
the current study. All the study hypotheses were proved with the help of various
statistical analyses. These hypotheses explained the role of DPs for IC and IP.
This study also explained the direct effect of IC on IP. The finding shows that
DPs support the businesses to improve knowledge and IP.

Table 5  Indirect effect of digital Data Boot Bias SE Lower Upper

platforms
DPICIP 0.1347 0.1336 − 0.0007 0.318 0.1649 0.2109

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Table 6  Moderating effect of Step 1 Step 2

innovation strategy (dependent (dependent
variable variable IP)
IP)

Innovation culture 0.30** 0.33**

Innovation strategy 0.22** 0.26**
Innovation culture × innovation strategy 0.24**

** <0.005

In this research, we also suggested direct relationship between DPs and IC of

an organization. The outcomes revealed that DPs also facilitate for the develop-
ment of IC. The study hypothesis is that IC has direct relationship with IP also
confirmed. The findings of the direct effect of IC on IP suggested that innovation-
related culture facilitates business organization to involve in innovation-related
activities which are basic source for IP.
In the current research, we also proposed that IC plays a mediating role
between the relationship of DPs and IP. DPs provide foundation for the exchange
of innovation knowledge among the business partners and organization members,
while IC is the basic structure that supports the formulation of innovation-related
activities that help the firms to improve their IP. Finally, the study proposed that
IS can be pertinent to speed-up the influence of IC and IP. The findings support
that the combination of IC and IS improves the IP of an organization.

Contribution to Theory

This study contributes to existing body of knowledge by providing in-depth understand-

ing about the innovation-related procedure of SMEs. The main contribution of this

4.5
Innova on Performance

4 Low Innova on
strategy
3.5
High Innova on
3 strategy

2.5

1.5

1
Low Innova on culture High Innova on culture

Fig. 2  Slope analysis

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study is to highlight the role of DPs of SMEs for the improvement of IP of these con-
cerns. There is a limited deliberation for the role of DPs as major determinants of IC
and IP in the existing literature and mainly in the SME sector of emerging economies.
Secondly, the study in hand contributes by offering a comprehensive IP Model
for SME sector operating in emerging economies. IP model establishes how DPs,
IC, and IS determine and enhance the IP of SMEs.
Third, the current study confirmed that DPs are the major sources for the accumula-
tion of innovation-related information that is important element for the development of
IC within an organization (Aksoy, 2017). Through IC, organizations are able to find
out new-fangled opportunities for the formulation of innovation activities based on the
acquired information through DPs (Chen et al., 2018; Ghasemzadeh et al., 2019; Halim
et al., 2015). An existing study mostly deliberated on the role of IC in the context of
large-scale organizations. Limited studies focused on the determinants and outcomes
of IC in the context of SMEs. Therefore, the current study is one of the steps to fill this
research gap in the existing literature and highlight the determinant and outcomes of IC.

Practical Implications

The findings suggested valuable implications for management in practice. First,

the current study recommended that owner/managers of SMEs improve the IP of
their businesses with sound DPs. Furthermore, the current study suggested for
management to develop IC in the business organization with the help of DPs. To
improve the IP, the owner/mangers should value the DPs that strengthen IC which
is fundamental for the formulation of innovation activities. DPs can be the best
options to respond the environmental dynamism via IP.
Secondly, findings suggest that IC is considered a critical determinant of IP and
provides basic infrastructure for exploring the new opportunities necessary for the
innovative activities in the industry. To successfully respond the dynamic envi-
ronment challenges, the management should provide infrastructure to the organi-
zational members to think strategically and innovatively. Therefore, this study
advocates the management of SMEs to establish sound DPs in order to secure the
update knowledge about market and business partner for the betterment of IP.

Conclusions

The aim of this research was to understand the direct effect of DPs for IC and
IP. Furthermore, the direct association between IC and IP was also proposed for
testing. Beyond the direct effect, mediating effect of IC has also been tested. The
study also considered the moderating role of IS on the association between IC
and IP. The findings revealed that DPs directly influence IC and IP of an organi-
zation. Furthermore, the direct relationship of IC and IP was also confirmed.
Results suggested that IC mediates between DPs and IP link. Finally, the findings
revealed that IS improves the IC and IP link.

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Author Contribution Zahid Yousaf: project supervision; conceptualization, data curation, and methodol-
ogy; Mosab I. Tobash: software and validation; Abdelmohsen A. Nassani: formal analysis, investigation,
resources; Mohamed Haffar: writing—review and editing.

Acknowledgement Researchers Supporting Project number (RSP -2022/87), King Saud University,
Riyadh, Saudi Arabia.

Data Availability Data that support the research study will be available on demand.

Declarations

Conflict of Interest The authors declare no competing interests.

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Authors and Affiliations

Zahid Yousaf1 · Mosab I. Tabash2 · Abdelmohsen A. Nassani3 ·

Mohamed Haffar4
Mosab I. Tabash
[email protected]
Abdelmohsen A. Nassani
[email protected]
Mohamed Haffar
[email protected]
1
Government College of Management Sciences, Mansehra, Pakistan
2
College of Business, Al Ain University, Al Ain, UAE
3
Department of Management, College of Business Administration, King Saud University,
Riyadh P.O. 71115, 11587 Box, Saudi Arabia
4
Department of Management, Birmingham Business School, Birmingham, UK

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