IMPACT OF HUMAN CAPITAL ON PRODUCT INNOVATION PERFORMANCE IN SMES OF KHYBER PAKHTUNKHWA: MEDIATING ROLE OF ORGANIZATIONAL LEARNING CAPABILITY

Abstract

This study investigates the impact of human capital on product innovation performance in SMEs in KP. It examines the mediating role of organizational learning capability, addressing a significant contextual and theoretical gap in developing economies.  A quantitative, cross-sectional design was used to collect data from 379 employees across various SMEs in the region. Using well-established scales, we measured HC, OLC, and PIP. The data were analyzed using the Baron and Kenny (1986) mediation analysis framework via SPSS. The results confirm that HC has a strong, positive effect on PIP (β=.98, p<.001). More importantly, the findings reveal a partial mediating effect of OLC on this relationship. These findings highlight that possessing a skilled workforce is crucial for innovation. This effect is significantly amplified when organizations have established routines for knowledge acquisition. This study offers practical implications for SME leaders and policymakers, suggesting that to foster sustained innovation, firms must not only invest in their human capital but also cultivate a robust learning-oriented culture.