Market orientation and performance of Small, Medium and Micro Enterprises in the Capricorn and Waterberg District Municipalities, South Africa : the role of innovation and absorptive capacity

Abstract

An increasing number of recent studies have emphasised an important dimension of market orientation. Previous research has explored the relationship between market orientation (MO) and performance (P), revealing various integrated mechanisms. However, the findings have been inconsistent, likely due to the neglect of the mediating and moderating roles of innovation (I) and absorptive capacity (AC). To address this gap directly, the current study examined the relationship between market orientation and the performance of Small, Medium, and Micro Enterprises (SMMEs), while also investigating the moderating effect of absorptive capacity on this relationship. A quantitative approach was employed, utilizing a cross-sectional survey method to gather data from conveniently sampled respondents. Reliability was measured using Cronbach’s alpha, and Partial Least Square Structural Equation Modelling (PLS-SEM) was applied for data analysis. The study's findings revealed a significant positive relationship between market orientation and the performance of SMMEs. While the mediating effect of innovation was found to be significant, the moderating impact of absorptive capacity was deemed insignificant. Based on these findings, recommendations were made for SMMEs to enhance their focus on market orientation in order to improve their business outcomes