Market and Supply Chain Orientation;Dynamic Capabilities Leading to Innovation and Operational Capabilities

Abstract

SMEs always need survival tools or strategies such as orientation and capabilities to survive in the competitive market, as they can help in improving performance. Therefore, this research has highlighted important capabilities and orientations influencing SMEs’ performance in Oman. It has examined the effect of supply chain orientation and market orientation on SMEs’ performance with mediating role of innovation capabilities and operational capabilities. Moreover, it investigated the role of strategic flexibility as a moderator between innovation capabilities and SMEs’ performance in Oman. The survey method was used to collect primary data from managers and supervisors of SMEs functional in Oman. Data analysis was done using AMOS, and structural equation modeling (SEM) was conducted. The moderation was examined by using the Hayes process macro on SPSS. The results revealed that market orientation and SC orientation positively influence SMEs’ innovation capabilities, operational capabilities, and performance. These capabilities also help in enhancing performance. Moreover, they mediate the relationship between “supply chain orientation and SMEs’ performance” and “market orientation and SMEs’ performance.” Furthermore, strategic flexibility does not moderate the effect of innovation capabilities on SMEs’ performance.

Keywords

supply chain orientation market orientation innovation capabilities operational capabilities SMEs’ performance

Introduction

SMEs participate in economic development of countries by significantly influencing their socioeconomic growth (Šebestová & Sroka, 2020; Tee et al., 2016), thus, they are valued as the backbone of any country’s economy (Abbasi et al., 2018; Hooi et al., 2016; Iqbal et al., 2018; Jaiswal, 2014; Rahman et al., 2015; Robu, 2013). Besides creating jobs, boosting income levels, and enhancing the country’s competitiveness, SMEs empower young entrepreneurs to transform their concepts into reality (Bouazza et al., 2015). Similarly, in Oman, the country’s Vision Plan 2020 to 2040 has provided significance to SMEs, the government is now more concerned about their development. Moreover, this plan has emphasized the growth of SMEs to diversify Oman’s national economy and minimize its dependency on oil, which is facing high price-based volatility in international market (Alqassabi, 2020). The downfall of oil markets affected the competitiveness of many organizations in Oman, indirectly impacting the whole country’s economic activities. To overcome drastic effects of this downfall, the ministry is paying significant consideration to logistics and supply chain, and even the government has considered this sector a potential revenue source. Furthermore, the ministry of Oman is introducing many schemes to improve SMEs’ supply chain and logistics systems (Salim & Sulphey, 2021). NCSI (2018) reported that SMEs contribute 15% to the GDP of Oman and employ more than 40% of the workforce. Despite this huge contribution and government support, SMEs face performance issues due to SCM and market issues. Many SMEs consider supply chain management as an exertion of customers’ power and refrain from employing it. Further, they prefer to manage the supply chain at arm’s length (Quayle, 2003).

In comparison to SMEs, large organizations consider the supply chain as critical source of strategic advantage, and this consideration affects the competencies required by SMEs to meet market expectations. Thus, SMEs require a high degree of SC orientation (Macpherson & Wilson, 2003). Mentzer et al. (2001) was the first to conceptualize the notion of supply chain orientation, and later Esper et al. (2010) defined it as “supply chain orientation emphasizes the strategic awareness and embracing of SCM within an individual supply chain firm” (p. 162). Further, Hult et al. (2008) defined the term SC orientation as “the extent to which there is a predisposition among chain members toward viewing the supply chain as an integrated entity and on satisfying chain needs in an integrated way.” Min et al. (2007) highlighted that besides, SC orientation, the market orientation could also influence the operational performance. The alignment of SCM with market orientation is beneficial for companies (Jüttner et al., 2010) but still, only a few studies have indicated the influence of this joint on business results (Green et al., 2012), particularly in the context of SMEs. Moreover, Al Badi (2019) highlighted that it’s important to understand the marketing concept’s role in the context of economic transformation, policies, and particularly the regulatory reforms in Oman, and Abdelfattah et al. (2023) recommended determining the influence of supply chain parameters on the overall performance of SMEs in Oman as they are lacking the cooperation on marketing and supply chains (Sanyal et al., 2020). Therefore, this research has considered SC orientation as a SC parameter and used it parallel to market orientation while examining performance of Omani SMEs.

Kohli and Jaworski (1990) defined the notion of MO as the whole company’s way of getting, sharing, and responding to market intelligence. It’s a set of activities that everyone in the company does to figure out what customers want. This knowledge spreads through the company, which then uses to make customers happy. To achieve satisfactory aims and profitability, businesses should use more efficient and effective methods than those used by rivals (Blankson & Ming-Sung Cheng, 2005), thus market orientation being effective method can help businesses to react swiftly to market shifts by designing or introducing new goods and services (Ho et al., 2010). In SMEs, this orientation shows a rapid response to competitive challenges, changes in the preferences of consumers, and consumers’ dissatisfaction. Thus, for SMEs, market orientation can act as an ability to compete with large scale enterprises (Pelham, 2000). The more market-oriented SMEs can adjust themselves to the dynamic environment (Didonet et al., 2012) and increase their performance (Alpkan et al., 2007) by focusing on innovative culture (Abdul-Halim et al., 2019), innovative products (Thongsri & Chang, 2019), and particularly innovation capability (Huhtala et al., 2014; Kolbe et al., 2022; Migdadi et al., 2017; Singh et al., 2022; Zehir et al., 2015). Market orientation and innovation capabilities, both are intangible organizational assets, and organizations mostly use them to exploit market opportunities because these assets being unique can help them to achieve competitive advantage (Dogbe et al., 2020). Thus, this research proposed that market orientation can enhance innovation capability, leading to SMEs’ performance.

Didonet and Díaz (2012) explained that market orientation increases SMEs’ performance by enhancing innovation initiatives among several organizational strategies. From the theoretical lens of the Resource-Based View (RBV) theory, the organizational ability to develop innovation capabilities can lead the organizations toward competitive benefits, and the improvement in innovation capabilities of the product can positively improve the manufacturing performance (Adebanjo et al., 2018) and supply chain performance of organizations (Yang et al., 2015) in developing countries. Besides innovation capabilities, operational capabilities are also influenced by market and SC orientation and can enhance the performance of SMEs. Abdelfattah et al. (2023) recommended that besides exploring supply chain drives, it is important to determine the influence of any other organizational element on SMEs’ performance in Oman. Further, Zehir et al. (2015) examined innovation capability as a mediator between MO and SMEs’ performance, and recommended the investigation of additional capability that could act as mediator. Therefore, this research has proposed MO as an organizational element and operational capability as an additional capability that can influence SMEs’ performance. Winter (2003) defined this capability as an ability that enables firms to make it’s living in the short term. Zahra et al. (2006) proposed that competitive organizational performance based on dynamic capabilities is associated with the incorporation of changes in the operational capabilities. Thus, this research has proposed that besides SC orientation, market orientation can also enhance SMEs’ performance by facilitating operational capabilities. The influence of SC orientation and MO on performance has been investigated by many studies (e.g., Köhr et al., 2019; Na et al., 2019; Powers et al., 2020; Yu et al., 2019), but there is a paucity of literature highlighting their role or influence on the performance of SMEs. Moreover, there is a dearth of literature that examined the mediation of innovation and operational capabilities between the relationship of “market orientation and SMEs performance” and “supply chain orientation and SMEs performance.”

Strategic flexibility has been researched and discussed in management in several contexts (Shalender & Yadav, 2019). Moreover, this concept has been explored, conceptualized, and re-conceptualized since its development in the 1960s (Singh et al., 2013). According to Evans (1991) strategic flexibility is ability of an enterprise to respond effectively to the changes in the business environment; thus, it can be explained as the capability (Grewal & Tansuhaj, 2001). Many studies focusing on strategic flexibility examined its influence on performance (Nadkarni & Herrmann, 2010; Shalender & Yadav, 2019) and business model innovation (Miroshnychenko et al., 2021), but it’s important to understand how strategic flexibility being dynamic capability can strengthen or weaken the relationship between another capability (i.e., innovation capability) and SMEs performance. Therefore, this research has considered strategic flexibility as a moderator on the relationship between innovation capabilities and SMEs’ performance.

This study has used the theoretical lens of Dynamic capability and Resource Based View. First of all, the current research aimed to reveal whether an organizational intangible resource (i.e., SC orientation) can help organizations to develop innovative capabilities and operational capabilities and as result, these capabilities can enhance SMEs’ performance. Secondly, the dynamic capability theory is used as the presence of one capability as moderator (i.e., strategic flexibility) with another capability (i.e., innovation capability) can help in achieving the objective of organizational performance. The theoretical lens of the Resource Based View is relevant when it is assumed that organizational capabilities can lead to performance or competitive advantage (Adebanjo et al., 2018). Moreover, this theory should be adopted while considering intangible assets such as MO and innovation capabilities (Dogbe et al., 2020).

The study has conducted thorough research and a detailed literature-based investigation that revealed a gap in assessing how market orientation and SC orientation can enhance SMEs’ performance in Oman. Thus, current research tried to bridge this literature and practical gap by highlighting how organizational orientations and capabilities can lead to performance. Furthermore, the following research questions are answered by the research:

Does supply chain orientation increase SMEs’ performance?

Does market orientation increase SMEs’ performance?

Do innovation capabilities and operational capabilities mediate the relationship between supply chain orientation and SMEs’ performance?

Do innovation capabilities and operational capabilities mediate the relationship between market orientation and SMEs’ performance?

Does strategic flexibility moderate the relationship between innovation capabilities and SMEs’ performance?

Literature Review

SC Orientation and SMEs’ Performance

Since 2001, the term supply chain orientation has been discussed from various perspectives and Mentzer et al. (2001) defined it as “the recognition by an organization of the systemic, strategic implications of the tactical activities involved in managing the various ﬂows in supply chains.” The conceptualization of SC orientation is often mixed with SC management, and it’s important to differentiate these terms. Thus, Min et al. (2007) argued that SC management is an implementation of SC orientation, and both of these concepts are practical operationalization of SC management’s philosophy. Muhamed et al. (2023) explained SC orientation as the ability of the management team to combine the different objectives of its supply chain partners via the development of positive business relationships, which is critical to the firm’s performance. Cooper and Slagmulder (2017) described SC orientation as a company’s methodological and strategic identification of the different activities and procedures to manage the flow of the supply chain. Within the last several years, the interest in linking different supply chain characteristics with business performance is increasing (e.g., Basheer et al., 2019; Lee, 2008; Qorri et al., 2021).

Kirchoff et al. (2016) indicated SC management as a major factor in determining performance. Even though SC management (SCM) is a fundamental component of competitive advantage, many firms have yet to achieve the degree of integration required for increased performance in their supply chains. Thus, the nation of SC Orientation, which encompasses the behavioral aspects of the industry, has been recognized as a precursor to SC management, which promotes integration (Ekanayake et al., 2010).

The SC orientation is linked with SC management implementation intention (Schulze-Ehlers et al., 2014), which strongly correlates with performance (Vandapuye, 2018). Many researchers linked supply chain orientation with performance (Kirchoff et al., 2016; Yu et al., 2019), but still, there is a gap in explaining the performance of SMEs involved in manufacturing. Muhamed et al. (2023) highlighted the relationship between SC orientation and company performance in 284 halal-certified SMEs; they introduced the SCO model, which considers three factors when assessing corporate performance: top management support, commitment, and credibility. They presented a framework for halal food enterprises to enhance their performance by modifying their operations in connection with supply chain orientation. Moreover, Usmanova et al. (2022) used the theoretical lens of social capital theory (SCT) to reveal the effect of SC orientation on corporate performance and found that this effect is significant in the context of halal SMEs. Further, Dhaigude et al. (2021) focused on the knowledge-based view (KBV) and relational view (RV) to highlight the relationship between SC orientation, SC integration, and SC performance. Their main emphasis was on the industrial sector, and they gathered data from Indian manufacturers via face-to-face meetings using a well-established scale. The results of their research revealed a positive effect of SCI on SC performance. Acar et al. (2017) used RBV and highlighted supply chain orientation as an intangible organizational resource that can significantly and positively influence the operational performance of an organization. The literature has shown abundant studies investigating the role of SC orientation on performance, but only a few emphasized SMEs’ performance. Moreover, there is a paucity of literature revealing the performance of SMEs in Oman linked with supply chain orientation, an intangible organizational resource. Therefore, to highlight the effect of SC orientation on SMEs’ performance in Oman, we have proposed the following hypothesis:

H1: Supply chain orientation has a positive relationship with SMEs’ performance.

Supply Chain Orientation, Innovation Capabilities, and Operational Capabilities

To generate value for supply chain orientation, all supply chain partners should be prepared to contribute their resources, capabilities, and experience to achieve sustainable company success while satisfying consumer needs. Hence, the SCO value generation process is critical to the business’s stability. Similarly, the supply chain orientation improves organizational performance, customer performance, operational performance (Gligor, 2014), innovation capabilities, and operational capabilities. Damanpour (1991) highlighted that the association between supply chain and innovativeness becomes more critical when sustainable supply chain is considered as the only possible solution to attain a sustainable competitive advantage. The supplier’s operational capability is an external competency, and exploitative learning is an internal collaboration. The development of this collaboration and competency can enhance each other’s contribution to innovation capability (Liao & Li, 2019). Therefore, the supply chain orientation, being an external competency, can influence innovation and operational capabilities. Thus, we developed the following hypothesis:

H2: Supply chain orientation has a positive relationship with innovation capabilities.

defined operational capabilities as “firm-specific sets of skills, processes, and routines, developed within the operations management system that are regularly used in solving its problems through configuring its operational resources.”Chin et al. (2014) argued that supply chain integration significantly influences the operational capability of an organization. Moreover, supply chain management and operational capability are critical factors that help firms in generating the ability compete and survive in the competitive market. Therefore, this research hypothesized that supply chain orientation could significantly influence operational capabilities. The following hypothesis is designed to investigate the aforementioned relationship:

H3: Supply chain orientation has a positive relationship with operational capabilities.

Market Orientation and SMEs’ Performance

Market-oriented firms can gather information from the market and disseminate it within the enterprise in an organized way to respond to consumers’ rapidly and constantly changing requirements in an efficient and effective way (Kohli & Jaworski, 1990). Moreover, they strive to comprehend consumer demands by coordinating, organizing, and exchanging customer-related data to provide higher value to clients (Fang et al., 2014; Yoganathan et al., 2015). It is not only important for large enterprises, but it can also facilitate SMEs, and many studies have highlighted that it can influence the innovativeness of SMEs (Alhakimi & Mahmoud, 2020). Moreover, it can moderate the influence on the success of SMEs (Asad et al., 2020). From the perspective of the influence of internationalization, several scholars have classified SMEs’ market orientation as export-oriented (Fernandes et al., 2020). Therefore, it can influence the performance of SMEs as many studies revealed that market-oriented firms can do better business (Masa’deh et al., 2018; Fikri et al., 2022; Udriyah et al., 2019). Moreover, many prior studies confirmed the positive relationship between market orientation and SMEs’ performance (Alhakimi & Mahmoud, 2020; Buli, 2017; D’souza et al., 2022; Šályová et al., 2015) but still, the literature is insufficient in the context of SMEs operating in Oman.

Armario et al. (2008) highlighted that market orientation strengthens an SME’s proactive international market behavior and resource commitment to capitalize on market possibilities. Thus, emerging market SMEs should adopt a market orientation for their survival and obtain competitive advantages in an era of competition (Zhou et al., 2005). Ali et al. (2020) examined the influence of both market and entrepreneurial orientations and TQM on the SMEs’ performance in KSA and highlighted all of them are positively related to SMEs’ performance. In addition, Al Mamun et al. (2018) used the theoretical lens of RBV to highlight the influence of MO and entrepreneurial orientation on the performance of manufacturing SMEs and argued that both of these orientations positively and significantly affect customer involvement that leads to the success of Peninsular Malaysia’s manufacturing SMEs. Further, they revealed a partial mediating effect of customer involvement on performance between entrepreneurial and market orientations. To examine the influence of MO on SMEs’ performance, we have designed the following hypothesis:

H4: Market orientation has a positive relationship with SMEs’ performance.

Market Orientation, Innovation Capabilities, and Operational Capabilities

According to Didonet et al. (2016) MO enhances innovation and business performance (Herhausen, 2016). Alike, Saebi et al. (2017) demonstrated that a firm’s market orientation could enable them to innovate their business models. Kolbe et al. (2022) examined the influence of market orientation (i.e., proactive & reactive) and innovation capability on SMEs’ export performance and found that reactive MO and IC drive the export performance of SMEs. Beck et al. (2011) also evaluated MO and innovation indicators in family businesses. Innovation seems to be critical in determining the link between performance and client orientation, with rival yields serving as independent factors. Moreover, Liu (2013) argued that organizational innovation performance is linked with MO. Therefore, this research proposed that MO can positively influence innovation capabilities.

H5: Market orientation has a positive relationship with innovation capabilities.

Marketing orientation is specifically related to operational strategies (Dobni & Luffman, 2000) as operational functions can help the organizations to build strong market-oriented culture to enhance performance (Wilburn Green et al., 2015) and this culture can enable organizations to develop operational capabilities. Teece et al. (1997) presented the dynamic capability theory, which contends that dynamic capabilities do not directly result in marketable services or goods, but these capabilities are responsible for “building, integrating and reconfiguring” the operational capabilities (Ambrosini & Bowman, 2009; Protogerou et al., 2012). The operational capabilities enable the firms to perform basic functional activities (Collis, 1994) by focusing on retention of “status quo” (Stadler et al., 2013). In addition, Kachouie et al. (2018) explained that superior organizational outcomes and competitive advantage are not the outcomes of dynamic marketing capabilities but are obtained by developing operational capabilities. Therefore, this research proposed that MO can positively influence operational capabilities, and to identify the relationship between MO and operational capabilities, the following hypothesis is developed:

H6: Market orientation has a positive relationship with operational capabilities.

Innovation Capabilities, Operational Capabilities, and SMEs’ Performance

Innovation is vital to businesses; whether small or big, they must keep innovating and generate new ideas to survive (Brem & Voigt, 2009). Moreover, it is seen as a whole-of-organization activity that affects and shapes organizational behavior (Martínez-Román et al., 2011). Neely et al. (2001) defined the notion of innovation capability as a capacity to develop new outcomes. Similarly, Lawson and Samson (2001) defined innovation capability as “the capacity to translate information and ideas into new products, processes, and systems for the benefit of the firm and its stakeholders on a constant basis.”

Randhawa et al. (2021) highlighted that dynamic capabilities are important in promoting business model innovation, and a dedication to innovation is critical for SMEs’ success (Fiol, 1996). The literature has highlighted the significant correlation between organizational innovation capabilities and performance (i.e., Elgarhy & Abou-Shouk, 2023; Ferreira et al., 2020; Maldonado-Guzmán et al., 2019). Organizations having high innovation capacity can develop products and services in response to environmental change in the business cycle (Matsuo, 2006). Moreover, organizations’ innovation capabilities enable them to perform better in turbulent market conditions (J. Zhou et al., 2019). Saunila (2014) argued that innovation did not affect business performance, but many other studies found a positive relationship between innovation capabilities and performance (e.g., Maldonado-Guzmán et al., 2019; Rajapathirana & Hui, 2018). Siyamtinah (2016) explained that innovation capabilities are important in enhancing performance and competitive advantage. Moreover, the effective innovation capabilities inside a company will facilitate innovation and long-term product development. Similarly, Naala et al. (2017) investigated the role of innovation capability on the performance of Nigerian SMEs and highlighted that innovation capabilities positively impact company performance. The research also proposed that innovation capability is an important factor that can help SMEs in achieving superior performance. Therefore, this study has also hypothesized that:

H7: Innovation capabilities have a positive relationship with SMEs’ performance.

The organizational capabilities are difficult to replicate as they reside within the organizational routines and processes. Moreover, they help organizations in performing value-creating tasks. Compared to operational capability, marketing capability is more influential among the organizational capabilities as it strongly influences the firm performance (Krasnikov & Jayachandran, 2008). Whereas Tan et al. (2007) highlighted that operational capabilities significantly influence firms’ performance. In addition, Song et al. (2020) demonstrated that the interaction of network embeddedness and operational capabilities improves the working capital of SMEs. According to Adebanjo et al. (2018) the resource-based view theory can be considered when the aim is to investigate whether organizational capabilities can lead to performance or competitive advantage. Therefore, based on the theoretical lens of RBV, this research aimed to examine the relationship between operational capabilities and SMEs performance and developed the following hypothesis:

H8: Operational capabilities have a positive relationship with SMEs’ performance.

Operational Capabilities and Innovation Capabilities as Mediator

Gligor et al. (2020) examined several capabilities leading to performance and highlighted that SCO and MO can enhance business performance among these capabilities. According to Priem and Swink (2012) the supply chain orientation helps the company get more value, and MO helps the firms in making more value. In addition, Min et al. (2007), Patel et al. (2013) indicated that SCO positively impacts a company’s performance, enabling it to meet customers’ needs effectively by allowing for a coordinated and unified response across the chain. Moreover, studies have observed that SCO improves overall organizational performance, which comprises organizational, customer, and operational performance (Gligor, 2014; Min et al., 2007).

Hult et al. (2008), underlined the critical nature of the supply chain’s viewpoint and defined supply chain orientation as the degree to which chain members strongly desire to consider the supply chain as an interconnected entity. Moreover, Esper et al. (2010) conceptually explained that SCO is the result of a lot of different factors, such as “organizational design,”“human resources,”“information technology,” and “organizational measurement.” The supply chain orientation can influence operational performance (Patel et al., 2013) based on operational and innovation capabilities. Chin et al. (2014) highlighted that in SMEs, supply chain management practices have an indirect relationship with enterprise performance. Thus, the current study has proposed that this indirect relationship can be possible with innovation and operational capabilities. Therefore, the research has aimed to highlight operational capabilities as a mediator between SCO and SMEs’ performance. Based on this discussion, the following hypotheses are developed:

H9: Innovation capabilities mediate the relationship between supply chain orientation and SMEs’ performance.

H10: Operational capabilities mediate the relationship between supply chain orientation and SMEs’ performance.

Bamfo and Kraa (2019) highlighted that there is no evidence of a mediation influence of innovation on the relationship between competitor orientation and company performance in Ghanaian SMEs. In contrast, Huhtala et al. (2014) showed that innovation competence mediates the impact of a competition orientation during an economic crisis. Zehir et al. (2015) focused on SMEs in Turkey to study the link between MO, innovation capabilities, and export performance. Their research revealed that innovation capacity somewhat mediates market orientation characteristics and export performance. The evidence showed that SMEs might gain a competitive edge by enhancing their market-driven innovation capabilities. Alsadi and Aloulou (2021) studied the factors affecting the performance of Saudi SMEs and found that MO and SCI positively and significantly influence performance. Moreover, the SCI mediates the relationship between technology orientation and firm performance, and there is partial mediation of SCI between MO and performance. Gligor (2014) and Min et al. (2007) observed that several studies had explained the relation between MO and performance, but this orientation should be utilized in conjunction with other resources to enhance performance. Therefore, this research has proposed that these conjunctions are innovation and operational capabilities. Thus, the following hypotheses are derived:

H11: Innovation capabilities mediate the relationship between market orientation and SMEs’ performance.

H12: Operational capabilities mediate the relationship between market orientation and SMEs’ performance.

Strategic Flexibility as Moderator

Strategic flexibility is a broad concept, it is an organizational ability that can help organizations to identify innovation opportunities (Shimizu & Hitt, 2004; Uhlenbruck et al., 2003). Firms need to adopt innovation to achieve a sustainable advantage in turbulent environments. The positive effects of technological capability are strengthened by strategic flexibility. Thus, a higher level of strategic flexibility will lead to more association between technological capability and explorative innovation (K. Z. Zhou & Wu, 2010). Cingöz and Akdoğan (2013) revealed a positive relationship between strategic flexibility, innovation performance, and environmental dynamism. According to Yuan et al. (2010) product innovation is positively linked with organizational performance, but resource flexibility does not moderate this relationship. Whereas coordination flexibility positively moderates the aforementioned relationship.

Dynamic capabilities change the organizational broader resource base; thus, they cannot explain the performance but can enable the organizations to enhance performance. Moreover, there is little understanding that how dynamic capabilities can moderate the relationship between ordinary capabilities can performance (Laaksonen & Peltoniemi, 2018). Therefore, it’s important to highlight the role of strategic flexibility as a moderator in the relationship between innovation capabilities and SMEs’ performance, as SF is a dynamic capability (Combe & Greenley, 2004; Spanuth et al., 2020) and IC is an ordinary capability (Zhou et al., 2019). Thus, the following hypothesis is developed to investigate moderation of strategic flexibility on the relationship between innovation capabilities and SMEs performance.

H13: Strategic flexibility moderates the relationship between innovation capabilities and SMEs performance.

Based on the detailed literature-based discussion given above, the following conceptual framework is designed (See, Figure 1).

Figure 1.

Conceptual framework.

Methodology

Sample and Data Collection Process

First, the pilot testing was done by gathering data from 50 respondents. Reliability was examined with Cronbach’s alpha, and component factor analysis was done to analyze validity. The reliability of each construct was more than 0.7 and value of each item ensuring validity was also within the specified limit. The final version of the questionnaire was distributed after pilot testing. The data collection process started in May 2022 and ended in August 2022. Following purposive sampling, questionnaires were sent to manufacturing SMEs via email, and some were distributed personally by researchers using the “drop off and pick technique.” Most of the data were gathered from different WhatsApp groups and social media platforms where the link to the online questionnaire was sent to the CEO, supervisors, or general managers of SMEs because they could answer the questions accurately. In Oman, many SMEs don’t have a position of CEO, so it was aimed to gather data from any person in the most senior position, either the general manager or senior supervisor.

Ramachandran and Ali Al Yahmadi (2019) indicated that the “Public Authority for Small and Medium Enterprises Development (Riyada)” is responsible for the development of SMEs in Oman. Therefore, the contact information of some SMEs was obtained from this agency. According to NCSI (2019), there are 32,441 SMEs registered in Oman. SMEs sampled for this study covered enterprises engaged in production/manufacturing. Due to the unavailability of exact information about the number of services and production/manufacturing SMEs, we randomly selected 400 established SMEs. According to Cochran’s sample size formula, the sample size could be 385 when the population is unknown, and the margin of error is 5%. 400 SMEs were considered instead of 385 as it was uncertain that data could be gathered from every enterprise. The criterion for SMEs was ensured, which is explained by Riyada (2021) as to be classified as an “established SME,” the small enterprise should have 11 to 50 workers with annual sales from 150,000 to 1,250,000. The medium enterprise must have 51 to 150 employees with annual sales from 1,250,000 to 5 million.

Arabic is an official language of Oman, but we designed the questionnaire in English as most people understand it. Another reason behind adopting English is to retain the originality of items. The survey was designed to capture data on SCO, MO, innovation capabilities, operational capabilities, and SMEs’ performance. Out of 400 SMEs, only 339 responded to the questionnaire. We dropped seven responses as they were either incomplete or two options were selected in some questions. Hence, 332 responses were considered for the analysis, and it highlights the effective response rate of 83% (i.e., [332/400] × 100).

Measure of Constructs

The survey was designed by adopting/adapting items from prior studies, and every item used in it was measured on a “5-point Likert Scale.” All the items are shown in Appendix I. The information about those prior studies and items is given below:

Mentzer et al. (2001) conceptualized the SCO and indicated that it includes “trust,”“commitment,”“interdependence,”“organizational compatibility,”“vision,”“key processes,”“leader,” and “top management support.” Later, Min et al. (2007) highlighted key elements of supply chain orientation (i.e., “credibility,”“commitment,”“cooperative norms,”“organizational compatibility,” and “top management support”) and developed a comprehensive scale by adapting items from different studies. This study adopted the 20 items based scale of supply chain orientation from (Min et al., 2007); thus, the questions were about top management support, credibility, organizational compatibility, benevolence, and cooperative norms. In addition, this scale has also been used by different studies examining performance (i.e., Acar et al., 2017; Dhaigude et al., 2021). The four items based scale of MO is adopted from Borodako et al. (2022).

The innovation capabilities scale is adopted from Odoom and Mensah (2018) study, who developed five items based on prior studies. Following, Domenek et al. (2022), the scale of operational capabilities was based on four items. In addition, six items based scale of strategic flexibility is adopted from Zahra et al. (2008). Guo and Cao (2014) also used a scale of Zahra et al. (2008) to determine the influence of strategic flexibility on SMEs’ performance. Lastly, to measure SMEs’ performance, we adapted the five items based scale used by Adomako and Ahsan (2022), and in the survey, the managers were directed to compare the performance of their enterprise with rivals.

Data Analysis

SPSS version 26 was used to test sampling adequacy, common factor bias, and suitability of factor analysis. Whereas hypotheses testing, validity tests, and structural model analyses were determined using structural equation modeling (SEM) through AMOS-24. In addition, the moderation analysis was conducted through the Hayes process macro-model 1, as there is one predictor (i.e., Innovation Capabilities), one moderator (i.e., Strategic Flexibility), and one outcome (i.e., SMEs’ Performance).

Results

Robustness of Test and Descriptive Statistics

Analysis of outliers, data normality, and multicollinearity test is normally used to identify robustness issues. Mahalanobis test was applied to observe multivariate outliers using SPSS-26. After calculating the p-values of each “Mahalanobis distance” the outliers having a p-value less than .001 were removed from the final analysis as recommended by Balasooriya and Tse (1986), McLachlan (1999). In the current data set, no outliers were identified that have a p-value less than the defined criteria of .001; hence no respons was removed from further analysis, and the final sample size of 332 respondents. The results of descriptive statistics and data normality are shown in Table 1. The results indicated that the mean values of all variables are between 2.95 and 4.42 on a five-point scale, which shows the respondents’ tendency toward agreement. On the recommendations of Kline (2015), Kurtosis and Skewness were examined to test the normality of data. If the Kurtosis values are less than 10 and Skewness values are less than 3, then the data will be normally distributed. The results of data normality in Table 1 revealed that Skewness values range between −1.34 and 0.12 and Kurtosis values range between −1.65 and 1.51, which satisfy the data normality criteria recommended by Kline (2015). Furthermore, according to Hair et al. (2010) high correlation between variables can cause multicollinearity problems and less reliability of regression coefficients. Hair et al. (2010) suggested a value of 0.90, Kline (2015) suggested a value of 0.85, while Pallant (2020) suggested a value of above 0.70 as a threshold for multicollinearity. The correlation values of all variables (.19–.68), as shown in Table 3, revealed no multicollinearity.

Table 1.

Data Normality Test and Descriptive Statistics.

Variables	Min.	Max.	Mean	S.D	Skewness	Kurtosis
Supply Chain Orientation	2.60	4.85	3.77	0.53	0.12	−1.09
Market Orientation	1.00	5.00	3.03	1.28	−0.08	−1.45
Innovation Capabilities	1.00	5.00	2.95	1.27	−0.10	−1.65
Operational Capabilities	3.00	5.00	4.42	0.47	−1.25	1.51
Strategic Flexibility	1.00	5.00	3.04	1.08	−0.13	−0.99
SMEs’ Performance	1.00	5.00	3.97	0.86	−1.34	1.43

Note. N = 332.

Sampling Adequacy and Suitability of Factor Analysis

To check the sampling adequacy and assess factor analysis’ suitability, Kaiser-Meyer-Olkin (KMO) and Bartlett’s Test of Sphericity, respectively, are the most commonly used techniques. Hair et al. (1998) recommended a KMO index value of 0.80 or higher for sampling adequacy, while Sarstedt (2019) recommended significant results of Bartlett’s Test of Sphericity for suitability of factor analysis. As shown in Table 2, KMO index is 0.917, which satisfy the recommended criteria of Hair et al. (1998). Moreover, results also reveal significant results of Bartlett’s Test of Sphericity (X² = 11959.782; df = 946; p < .001).

Table 2.

KMO and Bartlett’s Test.

Kaiser-Meyer-Olkin measure of sampling adequacy.		0.917
Bartlett’s test of sphericity	Approx. Chi-Square	11,959.782
	df	946
	Sig.	.000

Note. N = 332.

Factor Analysis

To refine the quality of the measurement model, exploratory factor analysis (EFA) was conducted, and the results highlighted excellent loading for all items, except loadings of 3 items from supply chain orientation were poor and dropped from the final data analysis. Factor loading specified in the current study was 0.43 (low), 0.91 (high), and 0.74 (average). Stevens (2012) suggested the lowest factor loading as 0.40 and Tabachnik and Fidell (2012) suggested minimum criteria for factor loading as 0.32. Merenda (1997, p. 160) quoted, “It seems from the general literature in the social and behavioral sciences that a threshold factor loading of .30′ is the minimum that is traditionally used when deciding to accept an item or variable as belonging to a factor or component.”’ Furthermore, Peterson (2000) quoted, p. 111) that “factor loadings greater than .30 are considered to meet the minimal level.”Osborne et al. (2008) recommended that items loading less than 0.40 must be deleted from data analysis. Moreover, for common method bias, Podsakoff et al. (2003) recommended that when all the items of the data are loaded in a single factor, the total variance by extracting the sum of the square of loadings should be less than 50%, and for the current study, it was 33.079%.

The reliability of data, the validity of data, and measurement model fitness were determined by using confirmatory factor analysis (CFA) through AMOS24, and the results are given in Tables 3 to 5. Composite reliability (CR) values higher than 0.70 confirm data reliability (Nunnally & Bernstein, 1994). Results shown in Table 3 confirms data reliability as all CR values ranged between 0.74 and 0.96. Moreover, Hair et al. (2010) recommended the assessment of both convergent and discriminant validities for constructs’ validity. According to Bagozzi and Yi (1988), values of Average Variance Extracted (AVE) higher than 0.50 confirm convergent validity, while Fornell and Larcker (1981) recommended that the square root of AVE values must be higher than the constructs’ correlation values for discriminant validity. Furthermore, according to Henseler et al. (2015), Heterotrait-Monotrait Ratio (HTMT) values must be less than 0.90 for discriminant validity. Results show that all AVE values are greater than the cutoff criteria of 0.50, the values for the square root of AVE are higher than the constructs’ correlations, and HTMT values are also less than 0.90, which confirms excellent convergent and discriminant validities.

Table 3.

Validity Analysis.

Variables	CR	AVE	1	2	3	4	5	6
1-Supply Chain Orientation	0.92	0.51	0.714
2-Market Orientation	0.95	0.81	0.533***	0.901
3-SMEs’ Performance	0.87	0.57	0.315***	0.361***	0.752
4-Innovation Capabilities	0.93	0.72	0.325***	0.733***	0.432***	0.846
5-Operational Capabilities	0.74	0.50	0.356***	0.267***	0.554***	0.347***	0.707
6-Strategic Flexibility	0.96	0.79	0.438***	0.684***	0.366***	0.536***	0.187**	0.891

***

p < .001. **p < .01.

Table 4.

HTMT Analysis.

Variables	1	2	3	4	5	6
Supply Chain Orientation	-
Market Orientation	0.53	-
SMEs’ Performance	0.43	0.36	-
Innovation Capabilities	0.33	0.73	0.43	-
Operational Capabilities	0.44	0.28	0.57	0.36	-
Strategic Flexibility	0.44	0.69	0.37	0.54	0.20	-

Table 5.

Measurement Model.

Measurement model	X ²	df	X²/df	RMSEA	IFI	TLI	CFI
6-Factor baseline model	3,142.47	764	4.11	0.09	0.79	0.77	0.79
6-Factor revised model	1,675.97	747	2.24	0.06	0.92	0.91	0.92
Model fit criteria (Hu & Bentler, 1999)			<3.00	<0.08	>0.90	>0.90	>0.90

Note. N = 332.

Model Fitness

Prior to testing of hypotheses fitness of the measurement model was assessed as recommended by Anderson and Gerbing (1988). The model comprised six latent variables, as shown in Figure 2. CFA was conducted to test the model fitness, and results are presented in Table 5.

Figure 2.

Final structural model.

As recommended by Hu and Bentler (1999), the most frequently used fit indices “Chi-square (χ²/df), Tucker-Lewis index (TLI), Comparative Fit Index (CFI), Incremental fit index (IFI), and Root Mean Square Error of Approximation (RMSEA)” were used. Results highlighted poor model-fit of the baseline six-factor measurement model (χ²/df = 4.11, RMSEA = 0.09, IFI = 0.79, TLI = 0.77, and CFI = 0.79); however, after following modification indices and correlating various items of same variables, good model-fit was achieved (χ²/df = 2.24, RMSEA = 0.06, IFI = 0.92, TLI = 0.91, and CFI = 0.92).

Test of Hypotheses

In the current study, we have hypothesized six direct relationships and four indirect/mediating relationships. These direct and indirect hypotheses are tested by using the structural equation modeling (SEM) technique. Table 6 indicates the findings of direct effects. Results revealed that there is a significant impact of supply chain orientation on SMEs’ performance (B = 0.389; p < .001), innovation capabilities (B = 0.349; p < .001), and operational capabilities (0.351; p < .001) which led to acceptance of hypotheses H1, H2, and H3. Moreover, there is also a positive and significant impact of market orientation on SMEs’ performance (B = 0.325; p < .001), innovation capabilities (B = 0.686, p < .001), and operational capabilities (B = 0.233; p < .001), which confirmed hypotheses H4, H5, and H6. Furthermore, results also confirmed that SMEs’ performance is significantly influenced by innovation capabilities (B = 0.385, p < .001), and operational capabilities (B = 0.453, p < .001), thus, hypotheses H7 and H8 are also accepted.

Table 6.

Test of Hypotheses (Direct Effect).

Relationships	Estimate	T	p
H ₁: Supply Chain Orientation → SMEs’ Performance	0.389	7.66	***
H ₂: Supply Chain Orientation → Innovation Capabilities	0.349	6.76	***
H ₃: Supply Chain Orientation → Operational Capabilities	0.351	6.81	***
H ₄: Market Orientation → SMEs’ Performance	0.325	6.25	***
H ₅: Market Orientation → Innovation Capabilities	0.686	17.12	***
H ₆: Market Orientation → Operational Capabilities	0.233	4.35	***
H ₇: Innovation Capabilities → SMEs’ Performance	0.385	7.57	***
H ₈: Operational Capabilities → SMEs’ Performance	0.453	9.23	***

Note. N = 332.

***

p < .001.

Mediation effects of innovation capabilities and operational capabilities between the relationship of supply chain orientation and SMEs’ performance, and between the relationship of market orientation and SMEs’ performance are shown in Table 7. Results revealed that innovation capabilities (β = .160; 95% CI [0.098, 0.237]) and operational capabilities (β = .206; 95% CI [0.132, 0.286]) partially mediate the relationship between supply chain orientation and SMEs’ performance, as direct effect of SCO on SMEs’ performance is also significant in the presence of potential mediators (i.e., IC and OC). Hence, H9 and H10 are accepted. Moreover, results also reveal that there is mediation of innovation capabilities (β = .140; 95% CI [0.089, 0.199]) and operational capabilities (β = .062; 95% CI [0.031, 0.095]) between the relationship of market orientation and SMEs’ performance. Therefore, hypotheses H11 and H12 are also accepted. However, mediation results also show that the direct effect of market orientation on SMEs’ performance is insignificant in the presence of mediator (innovation capabilities), while significant in the presence of mediator (operational capabilities), which reveal that there is partial mediation of innovation capabilities between the relationships of market orientation and SMEs’ performance, and full mediation of operational capabilities between the relationships of market orientation and SMEs’ performance.

Table 7.

Test of Hypotheses (Mediation Effect).

Relationships	Indirect Effect	S.E	LLCI	ULCI
H ₉: Supply Chain Orientation → Innovation Capabilities → SMEs’ Performance (Direct Effect 0.470; p < .001)	0.160	0.04	0.098	0.237
H ₁₀: Supply Chain Orientation → Operational Capabilities → SMEs’ Performance (Direct Effect 0.423; p < .001)	0.206	0.04	0.132	0.286
H ₁₁: Market Orientation → Innovation Capabilities → SMEs’ Performance (Direct Effect 0.08; p = .10)	0.140	0.03	0.089	0.199
H ₁₂: Market Orientation → Operational Capabilities → SMEs’ Performance (Direct Effect 0.16; p < .001)	0.062	0.016	0.031	0.095

Note. N = 332. LLCI = lower limit confidence interval; ULCI = upper level confidence interval.

The moderation of SF on the relationship of innovation capabilities and SMEs’ performance was tested using the Slop test through the Hayes process macro as its most commonly accepted and used. Hayes process model 01 is used to investigate the moderation effect and results are shown in Table 8 and Figure 3. Results highlighted that with low ICs and low strategic flexibility, the SMEs’ performance is low compared to high innovation capabilities and strategic flexibility. Further, results indicated insignificant values of R² change F statistics, however, the slop of relationships showed nominal change in presence of strategic flexibility as a potential moderator. As there is no significant change (R² change = .008; p = .07; F statistics = 3.21) in the relationship between innovation capabilities and SMEs’ performance in the presence of potential moderator (i.e., strategic flexibility), hence, moderation hypotheses H13 is rejected.

Table 8.

Conditional Effects of the Focal Predictor (Innovation Capabilities) at Values of the Moderator (Strategic Flexibility).

DV: SMEs’ Performance
Test(s) of highest order unconditional interaction: (XW)*
R² -change = 0.008; p = .07
F statistics = 3.21
Moderator: Strategic Flexibility	β	p	95% CI
−1 SD	.039	<.001	0.115	0.269
Mean	.054	<.001	0.154	0.365
+1 SD	.055	<.05	0.016	0.232
W values in conditional tables are the mean and ±SD from the mean
Low strategic flexibility with low innovation capabilities	3.50
Low strategic flexibility with high innovation capabilities	4.47
High strategic flexibility with low innovation capabilities	3.49
High strategic flexibility with low innovation capabilities	4.52

Note. CI = confidence interval.

Figure 3.

Moderation graph.

Discussion

The performance of SMEs operating in Oman is low in comparison to other developing countries and particularly among GCC countries (Saqib et al., 2018) but there is a paucity of literature on the SMEs’ performance in Oman, and many studies have emphasized merely highlighting the challenges faced by them (Alyahya’ei et al., 2020). These challenges include a lack of market knowledge, limitation of the network, lack of business knowledge, difficulty in taking loans (Ramachandran & Ali Al Yahmadi, 2019), lack of finance (Al Buraiki & Rahman Khan, 2018), and ICT adoption (Ashrafi & Murtaza, 2008). Besides these challenges, many factors influence the performance of SMEs in Oman, and this research has focused on them. This study examined the essential constructs of SC orientation, MO, innovation capabilities, strategic flexibility, and SMEs’ performance. Subsequently, a framework is empirically analyzed to find the relationship of SCO and MO with SMEs performance as baseline hypotheses, along with the mediation effect of IC and operational capabilities and moderation of strategic flexibility between IC and SMEs performance. This research attempts to bridge the research gap by studying these aforementioned relationships in the context of manufacturing SMEs in Oman. First, it examined the influence of SCO and MO on SMEs’ performance (the primary constructs). Secondly, it analyzed the mediating role of innovation and operational capabilities between SCO and SMEs performance and MO and SMEs performance. Thirdly, it investigated the moderation of strategic flexibility between innovation capabilities and SMEs’ performance.

In SMEs, the SCO has great importance as its precondition for the implementation of SCM (Schulze-Ehlers et al., 2014) and during the process of value creation, this orientation views suppliers and customers as strategic supply chain partners (Sriyakul et al., 2019). Therefore, compliance with SCO by all supply chain partners can enhance the sustainable competitive advantage and performance (Dhaigude & Kapoor, 2017) but still, there is little investigation on SCO (Dhaigude & Kapoor, 2017; Schulze-Ehlers et al., 2014). Thus, the first hypothesis of this research, H1, was developed to highlight the positive role of supply chain orientation on the performance of SMEs in Oman. This positive relationship indicates that the performance of Omani SMEs is based on supply chain orientation. The results of this hypothesis highlighted the relevance of studying supply chain orientation for attaining the performance of SMEs. The results of H1 are supported by the prior research of Muhamed et al. (2023), who found that SMEs should adopt a supply chain orientation to be competitive. Moreover, the implementation of SC orientation being a strategic orientation strategy can help halal SMEs in attaining sustainable firm performance. Similarly, Acar et al. (2017) revealed that SCO positively influences operational performance. Moreover, SCO directly (Dhaigude & Kapoor, 2017) and indirectly affects the supply chain performance (Sriyakul et al., 2019). Thus, the results of the first hypothesis confirmed that SCO can positively influence the performance of SEMs in Oman.

Prior studies focusing on supply chain management issues have not emphasized the innovation models that can deal with the problems faced by MSMEs in the era of COVID-19 (Purwaningsih et al., 2022). Thus, the second hypothesis of this research, H2, aimed to investigate the positive relationship between supply chain orientation and innovation capabilities. The results revealed that SMEs can develop innovation capabilities by adhering to supply chain orientation. According to Freije et al. (2022) it’s interesting to highlight the role of SCI in developing IC. Similarly, Adebanjo et al. (2018) concluded that supply chain integrations and SC relationships positively influence innovation capabilities. Hult et al. (2008) also supported that SCO among suppliers and buyers leads to innovation and financial performance.

The SCM decisions should be aligned with a specific strategy or capability of a company (Saragih et al., 2020), and based on the conceptualization of current research, this capability can be operational capability. Therefore, the H3 was accepted, and the findings highlighted that SCO can positively influence operational capabilities. Raju et al. (2011) called for studies to examine the influence of MO on SME performance. Thus, the fourth hypothesis was developed to analyze the positive relationship between MO and SMEs’ performance. The results accepted this hypothesis by revealing that MO positively influences the performance of SMEs in Oman. Ali et al. (2020) also supported these results by identifying the significant and positive influence of MO on the performance of SMEs in KSA. Moreover, Petzold et al. (2019) found a positive relationship between MO and SMEs’ performance and indicated that SMEs confronting the economic downturn used the approach of MO for their survival. In addition, many studies supported the results of H4 by highlighting the role of MO on organizational performance (Borodako et al., 2022) and particularly on SMEs’ performance (Amin et al., 2016; Mahmoud, 2010; Udriyah et al., 2019). The fifth and sixth hypotheses of the study were developed to highlight the positive effect of market orientation innovation capabilities and operational capabilities, respectively. Both of these hypotheses were accepted, and according to the results, market orientation helps SMEs in developing innovation and operational capabilities. The SMEs should give importance to market orientation because it not only helps them in achieving innovation and operational capabilities but it also enhances their performance. The results align with the study of Tutar et al. (2015), who examined the role of different strategic orientations on innovation capabilities and concluded that market orientation positively leads to innovation capabilities. Similarly, Zehir et al. (2015) revealed that innovation capability is linked with dimensions of market orientation.

IC is an ordinary capability, and it can enhance the financial performance of companies (Zhou et al., 2019), and to highlight the positive relationship between IC and the performance of SMEs in Oman, this study developed H7. The findings highlighted that innovation capabilities are essential for SMEs to boost their performance. These results are supported by Maldonado-Guzmán et al. (2019), who examined the relationship between IC and performance of Mexican SMEs and found that performance is linked with innovation in product, management, process, and marketing. Thus, the IC can significantly and positively influence the SMEs’ performance in Mexico. In comparison to operational performance, the financial performance of SMEs is more influenced by IC (Saunila, 2014) but still, small businesses should pay attention to innovation capabilities to increase their performance (Saunila, 2020).

Saqib et al. (2018) projected the insignificant relationship between innovativeness and SME performance and concluded that future studies should focus on other possible factors that can help in improving SMEs in Oman. Our research has claimed that these factors can be supply chain orientation and market orientation as they can link with innovation capabilities to enhance the performance of SMEs. Thus, this research has developed H9 to investigate the mediating role of IC between SC orientation and SMEs performance. Moreover, H11 aimed to examine the mediation of innovation capabilities between market orientation and SMEs’ performance. The results reported that supply chain orientation directly and indirectly (i.e., in the presence of innovation capabilities) influences the performance of SMEs in Oman. Moreover, innovation capabilities mediate the relationship between market orientation and SMEs performance as these capabilities are influenced by market orientation and lead to performance. Therefore, H9 and H11 are accepted. Like innovation capabilities, operational capabilities can also influence the performance of SMEs. Thus, this research has developed H8 to determine the relationship between operational capabilities and SMEs’ performance. Moreover, H10 and H12 were developed to highlight the mediating role of operational capabilities between “supply chain orientation and SMEs performance” and “market orientation and SMEs performance” respectively. The results highlighted that operational capabilities not only influence the SMEs’ performance but act as a mediator between MO and SMEs performance, and SC orientation and SMEs performance. Thirathon and Meeprom (2020) also found that operational capabilities can help firms in increasing their performance. Thus, H8, H10, and H12 are accepted.

The last hypothesis aimed to highlight the moderation of strategic flexibility on the relationship of innovation capabilities and SMEs performance, but results demonstrated insignificant results and H13 was rejected. Strategic flexibility not only enhances performance, but it also influences innovative HR practices (Xiu et al., 2017). Whereas the current research revealed that strategic flexibility does not strengthen the relationship of innovation capabilities with SMEs performance, as the reason behind this could be theoretical nature of innovation capability and strategic flexibility. Innovation capability is an ordinary capability (Zhou et al., 2019), but strategic flexibility is dynamic capability (Guo & Cao, 2014), and according to Zhou et al. (2019) innovation capability being ordinary capability can mediate the relationship between dynamic capability and performance. Thus, strategic flexibility being dynamic capability cannot moderate the relationship of innovation capabilities with SMEs performance in Oman.

Implications

Theoretical Implications

This study has shifted the researchers’ attention toward highlighting the importance of strategic orientations and capabilities by linking them to the performance of manufacturing SMEs in Oman. The concepts of SCO and MO are studied a lot, but their applications in SMEs are still not well-explained. Thus, this research has contributed to the literature on orientations, capabilities, and SMEs’ performance in the following ways.

First, based on RBV and dynamic capability theory, this research has proposed a comprehensive framework to reveal the predictors of SMEs’ performance. According to Adebanjo et al. (2018) Resource-Based View (RBV) is relevant when it is considered that organizational capabilities can lead to performance. Daspit et al. (2016) highlighted operational capability as an ordinary capability that plays an important role in firm performance. Similarly, Zhou et al. (2019) mentioned innovation capability as dynamic capability leading to performance. Therefore, this study has contributed to the limited literature on these two important ordinary capabilities (i.e., innovation and operational capabilities). Moreover, it has empirically investigated the relationships between these ordinary capabilities and the performance of SMEs in Oman.

Secondly, this research has significantly contributed to the limited literature on MO and SC orientation in the scenario of SMEs performance by empirically examining the relationship of MO and SC orientation with SMEs performance. Additionally, innovation capabilities and operational capabilities were considered a mediator. The findings highlighted that MO and SCO can lead to SMEs performance in Oman by emphasizing IC and OC. Thirdly, this study has revealed several unexplored relationships and highlighted many factors that can enhance the performance of SMEs; thus, researchers focusing on SMEs can consider the results of the current study as a guideline for developing future studies or making research-based policies.

Managerial Implications

The research has developed a comprehensive framework, explored several relationships, and provided detailed theoretical implications for researchers and academicians but besides this, it has shown several practical implications by providing valuable insights for managers to adhere or develop different strategic orientations and organizational capabilities for increasing the performance of their SMEs. Most of the prior studies on orientations and capabilities were based on large-scale enterprises or MNCs but the emphasis of this research is on SMEs of Oman as they are facing issues related to performance. This study is important to provide the details of SC orientation and MO as both strategies are essential to SMEs’ performance. The marketing managers, operations managers, supply chain managers, senior supervisors, and top-level managers of SMEs in Oman should focus on supply chain orientation and marketing orientation. Supply Chain Orientation is a management concept that represents a firm’s drive to improve supply chain efficiency (Diniz & Fabbe-Costes, 2007), thus, a firm is considered to be SC oriented if its management (not just one or two people) understands the consequences of managing the upstream and downstream flows of goods, services, funds, and information between suppliers and consumers (Mentzer et al., 2001). This research recommends managers to make their enterprise supply chain oriented and market-oriented to boost performance as Demirbag et al. (2006) mentioned that market orientation is insufficient to increase the performance of SMEs in emerging countries. Hence, this study has coupled the market orientation with operational and innovation capabilities to yield the performance of SMEs in Oman. SMEs should consider operational and innovation capabilities as facilitating mechanisms for improving SMEs’ performance. Saunila (2020) explained that there is a need to sort the right and specific dimension of innovation capability according to the particular business requirements but our research has claimed that a broad aspect of innovation capabilities is required by SMEs. Therefore, innovation and operation managers should focus on innovation and operational capabilities.

Limitations and Recommendations

The study has revealed several factors enhancing the performance of SMEs and made a significant contribution to practice and theory. However, still, it has some limitations that future studies can consider. First, the data were gathered by owners, managers, and senior supervisors of SMEs instead of secondary sources like financial statements or reports. Therefore, future studies can gather data from secondary sources and focus merely on the financial performance of SMEs. Secondly, the emphasis of this research is on the SMEs of Oman, and studies in the future can focus on any other country. Thirdly, the study has merely focused on the supply chain and market orientations, but some other orientations can also directly or indirectly lead to SMEs’ performance. Thus, researchers can expand the framework of the current study by including entrepreneurial and knowledge orientation, as these orientations are also important for SMEs.

Footnotes

Appendix

Appendix I.

Questionnaire Items and Status of Adoption/Adaption.

Supply Chain Orientation
Items	Number of items- Sub	Status	Source
	(20) Credibility, Commitment, Benevolence, Top management support and Organizational compatibility	Adopted	Min et al. (2007).
“Promises made to our supply chain members by our business unit are reliable”	Credibility
“Our business unit is knowledgeable regarding our products and/or services when we are doing business with our supply chain members”
“Our business unit does not make false claims to our supply chain members”
“Our business unit is not open in dealing with our supply chain members”
“When making important decisions, our supply chain members are concerned about our welfare”	Benevolence
“When we share our problems with our supply chain members, we know they will respond with understanding”
“In the future, we can count on our supply chain members to consider how their decisions and actions will affect us”
“When it comes to things that are important to us, we can depend on our supply chain members’ support”
“We defend our supply chain members when outsiders criticize them, if we trust them”	Commitment
“We are patient with our supply chain members when they make mistakes that cause us trouble but are not repeated”	Commitment
“Our business unit is willing to make cooperative changes with our supply chain members”	Cooperative norms
“We believe our supply chain members must work together to be successful”
“We view our supply chain as a value added piece of our business”
Items	Number of items- Sub	Status	Source
“Our business unit’s goals and objectives are consistent with those of our supply chain members”	Organizational compatibility
“Our CEO and the CEOs of our supply chain members have similar operating philosophies”	Organizational compatibility
“Top managers repeatedly tell employees that this business units’ survival depends on its adapting to supply chain management”	Top management support
“Top managers repeatedly tell employees that building, maintaining, and enhancing long-term relationships with our supply chain members are critical to this business unit’s success”
“Top managers repeatedly tell employees that sharing valuable strategic/tactical information with our supply chain members is critical to this business unit’s success”
“Top management repeatedly tell employees that sharing risk and rewards are critical to this business unit’s success”
“Top management offers various education opportunities about supply chain management”
Market Orientation
Items	Number of items- Sub	Status	Source
“We continuously try to discover additional needs of our customers of which they are unaware. ”	4	Adopted	Borodako et al. (2022)
“The newly developed services of our company offer unique advantages to our customers”
“The newly developed services of our company solve the problems of our customers”
“The newly developed services of our company deliver high benefits for our customers. ”
Innovation Capabilities
Items	Number of items- Sub	Status	Source
“There is a constant generation of new service ideas in this firm”	5	Adopted	Odoom and Mensah (2018)
“We are constantly searching for new ways of doing things”
“There is creativity in our methods of operation”
“This enterprise is usually a pioneer in the market”
“This firm is able to introduce new products/services every five years”
Operational Capabilities
Items	Number of items- Sub	Status	Source
“Provide superior quality products and services”	4	Adopted	Domenek et al. (2022)
“Manufacturing equipment with performance that exceeds customers’ expectations”
“The quality of the production process ensuring equipment and services according to customers’ requirements”
“Ability to quickly meet the needs for materials and services requested by customers”
Strategic Flexibility
Items	Number of items- Sub	Status	Source
“Please indicate your evaluation of how flexible your business’s strategic planning process could be in response to the following events: [1 very low, 5 very high]”	6	Adopted	Zahra et al. (2008)
“Opportunistic shifts in economic conditions”
“The emergence of an unexpected market opportunity”
“The emergence of a new technology and adversely affects your existing business”
“Opportunities shifts in customer needs and preferences”
“The market entry of new competition”
“Adverse changes in government regulations”
SMEs Performance
Items	Number of items- Sub	Status	Source
In comparison to other companies in the industry	5	Adapted	Adomako & Ahsan, 2022).
“The employee ratio in my enterprise is growing”
“The market share of my enterprise is growing”
“The profitability of my enterprise is growing.”
“The sale of my enterprise is growing.”
“Overall performance of my enterprise is growing.”

Author’s Note

This research is part of my PHD thesis and not funded by any organization or institute.

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Hamed Ali Al Azzani

Data Availability Statement

The data for this research can be furnished on demand.

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