Effect of entrepreneurial orientation on radical innovation performance among manufacturing SMEs: the mediating role of absorptive capacity

Purpose The study explored the mediating role of potential and realized absorptive capacities in the relationship between entrepreneurial orientation and radical innovation performance among manufacturing small and medium-sized enterprises (SMEs). Design/methodology/approach Empirical analysis was based on 357 manufacturing SMEs in Ghana. Various validity and reliability checks were conducted before the presentation of the actual analysis, which was conducted using ordinary least squares approach, run using SPSS (v. 20). Findings Findings revealed that potential and realized absorptive capacities significantly mediated the relationship between entrepreneurial orientation and radical innovation performance among manufacturing SMEs. Further, it was identified that ambidexterity in absorptive capacity also had a greater effect on radical innovation performance among manufacturing SMEs. Research limitations/implications Since the data used were cross-sectional, the relationships measured represent only a snapshot of time. Longitudinal studies could therefore be adopted in the future to complement the cross-sectional conducted. Practical implications While managers of manufacturing SMEs seek to achieve higher radical innovation performance through entrepreneurial orientation, it should also be noted that both potential and realized absorptive capacities have a significant role to play in this relationship. Managers must therefore also seek to invest time to build both potential and realized absorptive capacities, as they define greater innovation success. Originality/value Some past studies have considered absorptive capacity as composite variable, therefore added both potential and realized absorptive capacities to form a single variable. Others also presented potential and realized absorptive capacities individually. This current study extends the body of knowledge by presenting an ambidexterity position between potential and realized absorptive capacities.