This study aims to examine whether firm innovation mediates the relationship between territorial entrepreneurship, the regulatory framework, organisational effectiveness and market performance in the Moroccan context. Using a micro-founded perspective and firm-level data from 309 companies, the research seeks to explain how territorial and institutional conditions are transformed into market outcomes through firms' innovation capabilities. By applying partial least squares structural equation modelling (PLS-SEM) to test direct and indirect relationships, the study intends to contribute to the innovation and entrepreneurship literature by clarifying the mechanisms through which external and internal factors jointly influence firms' market performance in a developing economy.
The study adopts a quantitative, cross-sectional research design based on a structured survey administered to 309 Moroccan firms operating in different regions and sectors. The measurement scales were adapted from established literature and assessed using a five-point Likert scale. PLS-SEM with SmartPLS 4 was employed to test the measurement and structural models, evaluate reliability and validity and examine direct and mediating effects among territorial entrepreneurship, regulatory framework, organisational effectiveness, firm innovation and market performance.
The results indicate that organisational effectiveness and the regulatory framework have a positive and significant effect on firm innovation, while territorial entrepreneurship shows no significant direct influence. Firm innovation exerts a strong and significant impact on market performance, confirming its central role in the model. Mediation analysis reveals that firm innovation significantly transmits the effect of the regulatory framework to market performance, whereas the indirect effect of territorial entrepreneurship is not supported. These findings highlight firm innovation as the main mechanism through which institutional and organisational conditions are transformed into superior market outcomes in the Moroccan context.
This study is limited by its cross-sectional design and its focus on Moroccan firms, which may restrict the generalisability of the findings to other institutional or national contexts. Future research could apply longitudinal designs and comparative analyses across developed and developing economies to capture dynamic effects and enhance external validity. Additional variables such as organisational culture, leadership, access to finance and digital maturity could also be integrated to refine the explanatory power of the model. These extensions would contribute to a deeper understanding of innovation-based performance mechanisms.
The findings suggest that improving market performance cannot rely solely on favourable territorial conditions or regulatory reforms. Managers should primarily invest in strengthening organisational effectiveness through better internal coordination, decision-making processes and efficient resource allocation to enhance firms' innovation capabilities. For policymakers, territorial development strategies and regulatory reforms should be combined with firm-level innovation support programs, such as innovation financing, institutional stability and administrative simplification. Without strong internal innovation capacities, territorial and regulatory initiatives are unlikely to generate sustainable improvements in firms' market performance.
By highlighting firm innovation as a key mechanism linking institutional and organisational conditions to market performance, this study underscores the social importance of building innovation capabilities in developing economies. Stronger innovative firms can contribute to job creation, skills development and more resilient local economic structures. In the Moroccan context, supportive regulatory environments and effective organisations may foster inclusive growth by enabling firms to generate sustainable value, enhance competitiveness and improve income opportunities. Ultimately, promoting innovation-driven performance can support broader territorial development and social stability in emerging markets.
This study offers a micro-founded and integrative framework that links territorial entrepreneurship, regulatory framework, organisational effectiveness, firm innovation and market performance. Unlike most prior research focussing on macro-level factors or direct effects, it conceptualises firm innovation as a central mediating mechanism through which territorial and institutional conditions are transformed into market outcomes. Empirically testing this mediation model using PLS-SEM and firm-level data from a developing economy provides novel evidence from the Moroccan context, which remains underexplored in the innovation and entrepreneurship literature. The study thus advances both theory and empirical understanding of innovation-driven performance in emerging markets.
