Relationship between Entrepreneurial Orientation, Firm Resources, SME Branding and Firm’s Performance: Is Innovation the Missing Link?

Abstract

Innovation is regarded as an engine for driving economic growth. Innovation is considered equally important for the large enterprises as well as the Small and Medium Enterprises (SMEs). Role of innovation becomes of even greater importance in the context of the business environment of developing countries such as Pakistan, where most of the SMEs do not embrace rigorous innovation and at the same time there is lack of sufficient external support to encourage innovation. It has been discussed that despite of healthy economic contribution to Pakistan’s Economy, SMEs are facing a low growth trap. Innovation can come up as a potential solution specifically for Pakistani SMEs and generally for SMEs in developing countries in other parts of the world. This paper reviews the literature in a thorough manner in a bid to build a novel conceptual framework proposing that innovation has causal linkages with entrepreneurial orientation, firm resources, branding and firm performance. On the basis of literature review, four thoughtful research propositions have been presented in this paper. The proposed framework can lead to very useful insights as it proposes that branding may lead to innovation as opposed to generally believed concept of innovation leading to branding. This paper is built on the underpinning theories like Resource Based View, Dynamic Capabilities Perspective, and Theory of Economic Development. This paper also provides useful implications for the entrepreneurs as well as external institutions responsible for ensuring higher extent of innovation in SMEs in Pakistan.

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