Strategic orientations and SME performance: Moderating effect of absorptive capacity of the firm

Abstract

This paper examines the effect of recent configuration of strategic orientation on SME performance and the moderating effect of absorptive capacity of the firm. Data from 350 owner-managers of small and medium scale hotel and restaurants in Sri Lanka were used with structural equation modelling. The structural model investigates the direct effects of market, entrepreneurial, and learning orientations on firm performance and moderating effect of absorptive capacity. Results indicate that SMEs with high level of absorptive capacity would achieve higher performance by maintaining higher level of strategic orientation.