FROM ORIENTATION TO OUTCOMES: HOW ENTREPRENEURIAL MARKETING AND INNOVATION CAPABILITIES DRIVE SME SUCCESS

Abstract

This study investigates whether all facets of small firm performance improve uniformly when a firm emphasizes Entrepreneurial Marketing Orientation (EMO) and builds Innovative Capabilities (IC). Prior research suggests both EMO and IC drive overall SME success, but treating “performance” as a single outcome may obscure important nuances. We therefore decompose performance into marketing, innovative, and entrepreneurial outcomes and examine differential effects of EMO and IC on each. We draw on survey data from 403 owner-managers of tourism SMEs in Pakistan. We employ a covariance-based multivariate structural equation model to estimate the paths from EMO and IC to the three performance dimensions simultaneously, allowing formal tests of differences across outcomes. We also test for mediation (EMO → IC → performance) and conduct dominance analysis to assess relative importance. EMO has a significant positive effect on marketing, innovative, and entrepreneurial performance (standardized β ≈ 0.49–0.56, p < 0.001). Innovative capability likewise shows positive effects (β ≈ 0.25–0.38, p < 0.001). However, not all outcomes rise equally: EMO’s impact is greatest on innovative performance, whereas IC contributes most to marketing performance, though these differences are statistically modest. EMO also strongly promotes the development of innovative capability itself (β = 0.706***), which partially mediates EMO’s influence on all performance dimensions. Overall, EMO emerges as the dominant driver of SME performance, with innovative capability playing a supportive but vital role. We extend entrepreneurial marketing theory by unpacking its multi-dimensional performance effects and identifying innovative capability as a key mediating mechanism. Results suggest tourism SMEs should first and foremost foster an entrepreneurial marketing orientation – doing so yields balanced improvements in customer-related outcomes, innovation outputs, and business growth. Concurrently, investing in innovative capabilities amplifies marketing success and sustains long-term performance. In dynamic markets, an EMO culture coupled with strong innovation capacity is a powerful formula for broad-based SME performance gains.

Keywords: Entrepreneurial Marketing Orientation (EMO); Innovative capability; Marketing performance; Innovative performance; Entrepreneurial performance