The Complementary Effect of Network Capability and Learning Orientation on Firm Performance: Evidence From SMEs in Türkiye

Introduction

Since SMEs have a significant impact on economic advancement in developing countries, identifying the factors that drive SMEs’ success is crucial (Akman & Yilmaz, 2008) in the context of innovation-based competitiveness on a global scale (Teece, 2014). The literature suggests that SME innovation and performance are highly influenced by both internal and external resources and capabilities (see, e.g., Caloghirou et al., 2004; Salavou et al., 2004). Since small firms have been confronted resource scarcity, which potentially hinders their innovation activities, they need to develop internal and external capabilities to mitigate the repercussions of scarce resources (Parida & Örtqvist, 2015). Emerging market in Türkiye is known for its uncertainty and dynamism, and firms operating in this environment strive to increase their capacity for innovation (Bouguerra et al., 2022). Therefore, improving SMEs’ innovative capabilities has been one of the main priorities for Türkiye’s SME policy (Cakar & Erturk, 2010).

This study focuses on the complementary effect of an external and an internal capability on SMEs’ innovation capabilities and firm performance. More specifically, this study suggests that SMEs’ success can be collectively influenced by their external capability, such as Network Capability (NC), as well as their internal capability, like Learning Orientation (LO). Individual direct effects of NC and LO on innovation capability and firm performance have been previously suggested (see, e.g., Alegre & Chiva, 2013; Xie & Zheng, 2020), however, there are no empirical research that have investigated the complementary effect of NC and LO on SME performance in an emerging market.

The arguments of this study are built on dynamic capabilities theory (Teece, 2007) which is an extension of Resource-Based View (RBV) of the firm (Barney, 1991). This theory addresses the integration of internal and external resources and capabilities to gain competitive advantage (Teece et al., 1997). Moreover, dynamic capability theory complements RBV of the firm by suggesting the evolutionary nature of organizational resources and capabilities in dynamic environmental contexts to explain differences in firm performance (Wang & Ahmed, 2007). Therefore, dynamic capability approach builds an appropriate theoretical foundation to elucidate the development of NC and LO which enable SMEs’ improved performance (Mu et al., 2017).

According to the dynamic capability framework, the mechanisms that link the dynamic capabilities to firm performance needs to be understood comprehensively (Chen et al., 2021). Dynamic capabilities influence organizational outcomes indirectly through an effect on other capabilities (Baker et al., 2022). Firms with a strong LO which is complemented by NC are generally in a better position to develop specific capabilities that ultimately affect firm performance (Calantone et al., 2002). In this sense, innovation capabilities seem to be a crucial link between other capabilities and firm performance (Hult et al., 2004). Therefore, this study suggests that NC and LO collectively contribute to the firm performance through their effect on product and process innovation capabilities.