This study investigates how Hybrid Strategy and Sustainability Orientation jointly influence SME performance, emphasizing the mediating roles of Product, Process, and Social Innovation across financial, market, and social dimensions.
Drawing on the Resource-Based View, Dynamic Capabilities Theory, and Stakeholder Theory, the study develops and tests a conceptual framework using Partial Least Squares Structural Equation Modeling. Data were obtained from a cross-sectional survey of SMEs in emerging markets.
Both Hybrid Strategy and Sustainability Orientation significantly enhance all three forms of innovation. Product innovation emerged as the most influential, particularly in driving financial and social performance. Process innovation contributed strongly to market performance. Social innovation showed meaningful effects on social outcomes but was not significantly linked to financial performance, indicating varied contributions of innovation types across performance dimensions.
The findings provide actionable insights for SME managers and policymakers. Integrating cost-efficiency with differentiation and sustainability orientation boosts innovation outcomes. Managers should prioritize product and process innovation for immediate gains while pursuing social innovation as a long-term strategy to build stakeholder trust. Policymakers are encouraged to support these dual strategies through targeted innovation programs and incentives.
This study develops a novel integrative framework that links two strategic orientations Hybrid Strategy and Sustainability Orientation with multidimensional SME performance (financial, market, and social) through the distinct mediating roles of product, process, and social innovation. It is among the first to empirically disentangle these innovation pathways within resource-constrained and sustainability-driven contexts, offering a more nuanced and evidence-based understanding of strategic innovation in SMEs.
