Riyadh SMEs link entrepreneurial drive to advantage through innovation

A survey of 385 small and medium-sized enterprises in Riyadh, Saudi Arabia, found that firms reporting a stronger entrepreneurial orientation also reported greater sustainable competitive advantage and more externally informed product and process innovation. The cross-sectional study found statistically significant indirect associations through both innovation pathways for all four entrepreneurial dimensions examined: proactiveness, risk-taking, autonomy and competitive aggressiveness. Because the data were collected at one point in time from one knowledgeable respondent per firm, these patterns do not establish that entrepreneurial behavior causes innovation or that innovation causes competitive advantage; instead, they identify a consistent statistical pathway compatible with the proposed mechanism.

Researchers analyzed structured questionnaires completed by owners, founders and senior managers of SMEs operating in Riyadh. The sample included service, retail, industrial and agricultural firms, alongside both young and more established enterprises. Entrepreneurial orientation was assessed on a five-point Likert scale through proactiveness, willingness to commit resources under uncertainty, employee autonomy and intensity in challenging competitors. The analysis also examined open innovation, represented in practice by externally informed product and process innovation, and sustainable competitive advantage, measured through perceptions of quality, customer value, loyalty, reputation, adaptability, innovation, long-term performance and environmental and social responsibility. Firm size and managerial experience were included as controls in the regression and mediation models.

Overall entrepreneurial orientation had a positive standardized association with sustainable competitive advantage, with a coefficient of 0.724, and with the combined open-innovation measure, for which the coefficient was 0.741. Open innovation, in turn, was positively associated with competitive advantage at 0.845. Product and process innovation each had strong positive associations with the outcome, with standardized coefficients of 0.779 and 0.772, respectively. These figures describe associations among respondents’ ratings rather than measurements of objective profitability, patent activity or productivity. They nevertheless show that firms’ perceived innovative practices and entrepreneurial routines moved together with their perceived competitive capabilities.

The separate dimension-level models showed that proactiveness had the largest standardized association with sustainable competitive advantage, at 0.704, followed by competitive aggressiveness at 0.623 and autonomy at 0.510. Risk-taking was positive but comparatively moderate, at 0.368. Because each dimension was analyzed in a separate model rather than entered simultaneously, the ordering does not demonstrate that one dimension uniquely outperforms the others after controlling for all remaining entrepreneurial behaviors. The pattern offers a descriptive distinction: anticipating opportunities and responding assertively to rivals had stronger associations than general willingness to accept uncertainty in the surveyed firms.

Every entrepreneurial dimension was also positively associated with both product and process innovation. Competitive aggressiveness had the largest reported relationship with product innovation, with a standardized coefficient of 0.642, while proactiveness and competitive aggressiveness were also strongly related to process innovation. Autonomy showed a somewhat stronger association with process than product innovation. The results fit a practical distinction in which market-facing renewal can respond directly to rivals, whereas operational renewal may be initiated by employees who encounter bottlenecks in daily workflows. The evidence does not show that either kind of innovation is universally superior, and the study did not estimate sector-specific differences despite the sample’s diversity.

Bootstrapped mediation analysis provided the study’s central result. The researchers fitted Hayes’ PROCESS Model 4 with 5,000 bootstrap samples to eight separate pathways, combining each entrepreneurial dimension with either product or process innovation. All eight 95% confidence intervals for the indirect effects excluded zero. The estimated indirect association through product innovation ranged from 0.2767 for risk-taking to 0.3459 for competitive aggressiveness, while estimates through process innovation ranged from 0.3062 for risk-taking to 0.3592 for autonomy. In each model, the direct association between the entrepreneurial dimension and sustainable competitive advantage remained positive and significant after the mediator was introduced, indicating partial rather than complete mediation in statistical terms.

The pathway estimates suggested that different entrepreneurial behaviors may be linked with competitive advantage through different forms of renewal. Proactiveness and competitive aggressiveness were prominent in product-oriented pathways, consistent with an association between early market sensing or rivalry and market-facing innovation. Autonomy produced the largest process-innovation indirect estimate, suggesting that employee discretion may be especially relevant to workflow improvement, technology adoption and operational problem-solving. For risk-taking, both indirect estimates exceeded its remaining direct effect. This does not mean that risk-taking is inherently unimportant, nor does it prove that every formal experiment is beneficial; rather, the results are consistent with a value for risk when uncertainty is converted into a defined product or process initiative, prototype or staged learning effort.

The measurement analysis generally supported the internal consistency of the seven focal constructs. Cronbach’s alpha values ranged from 0.893 to 0.932, composite-reliability values ranged from 0.900 to 0.943, and average variance extracted values ranged from 0.598 to 0.666. Most construct pairs also met the study’s conservative discriminant-validity threshold. One exception was product innovation and process innovation, whose heterotrait–monotrait ratio was 0.917, above the stated 0.90 cutoff. That similarity means the two pathways should not be treated as fully independent constructs, and the authors appropriately described comparisons between their indirect-effect estimates as descriptive rather than statistically established. Harman’s single-factor test showed that the first unrotated factor accounted for 45.562% of total variance, below a commonly used 50% benchmark, although this limited diagnostic cannot exclude common-method or social-desirability effects.

The study’s most portable result is therefore not a prescription for copying a particular entrepreneurial style, but evidence that entrepreneurial potential appears closely tied to how SMEs convert initiative into implemented change. Proactive behavior may create value when it leads to earlier customer engagement and product adaptation; autonomy may do so when employees can alter operational routines; risk-taking may do so through disciplined experimentation; and competitive aggressiveness may do so when directed toward quality and differentiation rather than price retaliation alone. The authors also stress that openness must be managed: external knowledge has strategic value only when firms can select, absorb, combine and apply it. For smaller businesses without large internal research departments, collaborations with customers, suppliers, universities and technology providers may offer access to complementary knowledge, but the findings do not show that every partnership succeeds.

Several boundaries constrain what can be concluded. The purposive, single-city sample was concentrated in Riyadh and is not a probability-based representation of all Saudi SMEs or other Gulf economies. The design relied on cross-sectional self-reports from a single knowledgeable informant per firm, making common-method bias, positive managerial self-assessment and reverse causality plausible explanations for part of the observed pattern. Respondents rated entrepreneurial orientation, innovation and competitive advantage highly, so the results describe perceived strengths in this group rather than independently verified business performance. Longitudinal research using multiple informants, objective innovation and financial measures, and probability samples across regions and sectors would be needed to test whether the proposed sequence unfolds over time. Within those limits, the survey identifies a coherent and unusually consistent pattern: for Riyadh SMEs, sustained competitive positioning is statistically linked not to entrepreneurial ambition alone, but to the product and process renewal through which that ambition is implemented.

Subject of Research: Associations among entrepreneurial orientation, open innovation and sustainable competitive advantage in Riyadh SMEs

Article Title: Entrepreneurial orientation and sustainable competitive advantage in Saudi SMEs: exploring product and process innovation pathways

Article References: Almoshaigeh, M., & Omri, A. (2026). Entrepreneurial orientation and sustainable competitive advantage in Saudi SMEs: exploring product and process innovation pathways. Frontiers in Sustainability, 7, 1959718. https://doi.org/10.3389/frsus.2026.1959718

Image Credits: AI Generated

DOI: 10.3389/frsus.2026.1959718

Keywords: Riyadh SMEs, Saudi Arabia, entrepreneurial orientation, open innovation, product innovation, process innovation, sustainable competitive advantage, mediation analysis, business strategy, cross-sectional survey, Entrepreneurial, orientation