Innovation as a mediator between Innovative Culture, Transformational Leadership, Knowledge Management, Learning Orientation, and Performance

It is believed that for small and medium-sized enterprises (SMEs), innovation is most important to deliver performance. Literature indicates that the most significant antecedents of innovation are learning orientation, transformational leadership, knowledge management, and innovative culture. Further, a research gap exists regarding the mediating effect of innovation for the relationships among these antecedents and SMEs performance in the Pakistan context. The scope of research is limited to SMEs and is novel and significant in this regard that it examines the mediatory role of innovation for the relationships between learning orientation, transformation leadership, knowledge management, innovative culture, and performance for Pakistani SMEs. This research employed quantitative research design and collected primary data from 150 SMEs (including retailers, hotels, restaurants, and boutiques) of Southern Punjab region. Area sampling technique was used wherein areas were selected randomly. Respondents were top managers/owners of SMEs. This research concludes that innovation does play a mediatory role. It contributes and strengthens transformational leadership theory, resource-based theory, theory of the growth of firms, and dynamic capabilities perspective. The study also contributes by providing practical implications and suggestions to the policy makers and managers of SMEs. It suggests that managers must develop an innovative culture to promote innovation and attain high performance. Further, effective knowledge management guarantees innovation and superior performance of the organization. Regarding, learning orientation, it suggests that information must be obtained from and communicated to all the employees for fostering innovation and high performance. Finally, the transformational leadership style must be used by leaders for enhancing the creativity of employees and improving SME performance.