COMPETITIVE ADVANTAGE AS A MEDIATING MECHANISM IN THERELATIONSHIP BETWEEN ENTREPRENEURIAL ORIENTATION AND SMEPERFORMANCE: EVIDENCE FROM NORTH-WEST NIGERIA

Abstract

Small and medium-sized enterprises (SMEs) are major contributors to economic growth,
employment, and innovation. However, SMEs in emerging economies continue to face
significant performance challenges due to resource constraints, institutional weaknesses, and
increasing market competition. Although entrepreneurial orientation (EO) has been
recognised as an important driver of firm performance, the mechanisms through which its
dimensions influence performance remain insufficiently understood. Drawing on the
Resource-Based View (RBV) and Contingency Theory, this study examines the mediating role
of competitive advantage in the relationship between the five dimensions of entrepreneurial
orientation and SME performance among registered SMEs in North-West Nigeria.
Entrepreneurial orientation was conceptualised as a multidimensional construct comprising
risk-taking, innovativeness, proactiveness, competitive aggressiveness, and autonomy. Using
a quantitative cross-sectional research design, data were collected from SME owners and
managers and analysed using Partial Least Squares Structural Equation Modelling (PLSSEM). The findings indicate that risk-taking, innovativeness, proactiveness, and competitive
aggressiveness have significant positive direct effects on SME performance, whereas
autonomy has no significant direct effect. The results further reveal that competitive
advantage significantly mediates the relationships between risk-taking, innovativeness, and
autonomy and SME performance but does not significantly mediate the relationships
involving proactiveness and competitive aggressiveness. These findings demonstrate that only
selected entrepreneurial orientation dimensions enhance SME performance through the
development of competitive advantage. The study contributes to entrepreneurship literature
by extending the Resource-Based View through the integration of competitive advantage as a
strategic mechanism linking specific entrepreneurial orientation dimensions to
organisational performance in an emerging economy. The findings also provide practical
insights for SME owners, managers, and policymakers by highlighting the importance of
strengthening entrepreneurial capabilities that foster sustainable competitive advantage and
improve long-term organisational performance.