Organizational Learning Capabilities and Firm Performance of SMEs in the United Arab Emirates: Mediating Role of Open Innovation

Abstract

The goal of this research is to examine the linkages between Organizational Learning Capabilities (OLC), Open Innovation (OI), and Firm Performance (FP) in the context of Small and Medium Enterprises (SMEs) in emerging economies such as the United Arab Emirates (UAE). Four first-order components are used to assess the OLC construct: managerial commitment (MC), systems perspective (SP), openness and experimentation (EX), and knowledge transfer and integration (TR). Inbound open innovation practices (IP) and outbound open innovation practices (OP) are used to assess OI. To reflect both financial and non-financial indicators, FP was measured using Market Effectiveness (ME) and profitability (P). Self-administered questionnaires were emailed to the owners/managers of randomly chosen manufacturing SMEs in the UAE. The sample size comprised 384 manufacturing SMEs operating in the seven emirates of the UAE. This study used SmartPLS 3 and Structural Equation Modeling (SEM) to investigate the structural links between OLC, IP, OP, ME, and P. The findings revealed that OLC had a beneficial influence on both dimensions of OI (IP and OP). The IP had a beneficial effect on both ME and P, whereas the OP had a positive effect only on P. These findings verify IP's mediating role in the interactions between OLC and ME and between OLC and P, whereas OP does not mediate the links between OLC and ME or between OLC and P. This is one of the first studies to contribute to the existing literature on innovation by investigating the substantial and complicated interrelationships among OLC, OI, and FP in single research, exhibiting numerous theoretical implications in the context of manufacturing SMEs in emerging countries. Overall, the study's findings confirm that owners/managers of UAE manufacturing SMEs must be aware of the importance of creating a working environment that fosters organizational learning processes and capabilities to improve inbound and outbound OI activities, thereby improving ME and profitability.

Keywords Confirmatory Factor Analysis, Openness and Experimentation, Firm Performance, Human Resources, Managerial Commitment, Market Effectiveness, Inbound Open Innovation Practices.