The Impact of Managerial and Adaptive Capabilities to Stimulate Organizational Innovation in SMEs: A Complementary PLS–SEM Approach

The aim of this study is to empirically explore and propose a rigorous model for the positive impact of managerial capability (in terms of decision-making, management style, people development, and succession planning) and adaptive capability (in terms of horizon scanning, change management, and resilience) on organizational innovation in the context of small and medium-sized enterprises (SMEs). The study uses partial least squares structural equation modeling (PLS–SEM) to test the model hypotheses, and importance-performance matrix analysis (IPMA) to provide information regarding the significance and relevance of the dimensions of managerial and adaptive capability in explaining organizational innovation in the proposed model. The empirical data is gathered through questionnaires from 210 SMEs. The results show a strong and significant relationship between managerial capability, adaptive capability, and organizational innovation. This study found that all of the dimensions of managerial capability and adaptive capability help to develop and improve the performance of organizational innovation in SMEs. The study concludes with a comprehensive discussion of the research limitations, and provides suggestions for future research.