Impact of market orientation and entrepreneurial orientation on organizational performance: with the moderating role of innovation in SMES in Sri Lanka

Abstract

This study examines the impact of market orientation (MO) and entrepreneurial orientation (EO) on the organizational performance of Small and Medium Enterprises (SMEs) in Sri Lanka, with a specific focus on the moderating role of innovation. This study examines the impact of market orientation (MO) and entrepreneurial orientation (EO) on the organizational performance of small and medium-sized enterprises (SMEs) in Sri Lanka, with innovation as a moderating factor. A total sample of 144 SMEs was selected using a stratified systematic sampling technique, ensuring representation across different sectors. The population includes SMEs in Sri Lanka, with the sample frame consisting of registered SMEs in various industries. The unit of analysis is the individual SME, focussing on the perceptions of SME owners and managers. The research adopts a quantitative approach, employing a structured survey to gather data on MO, EO, innovation, and performance. The findings aim to offer actionable insights for SMEs to effectively align their market and entrepreneurial strategies with innovation, driving sustained success in a competitive environment. The results reveal that both MO and EO have significant positive impacts on organizational performance, consistent with past research findings. Market Orientation enhances performance by enabling firms to understand and respond to customer needs and market dynamics. Entrepreneurial Orientation contributes to performance through innovation, risk-taking, and proactive opportunity identification. Innovation, as a moderating factor, further amplifies these effects. Specifically, the interaction between MO and innovation shows a moderate impact on performance, while the combination of EO and innovation demonstrates a significant positive effect. The findings contribute to the existing literature by highlighting the importance of integrating market and entrepreneurial orientations with innovative practices. For SME owners and policymakers, this study offers valuable guidance on optimizing resources and strategic initiatives to enhance competitiveness and growth. By providing empirical evidence from the Sri Lankan context, the study underscores the relevance of strategic orientations and innovation in driving SME performance in dynamic and competitive markets.