Survey links Ethiopian small firms’ performance to innovation capability

A quantitative survey of 300 owners, employees and managers working in Ethiopian micro and small enterprises found that intellectual capital and entrepreneurial orientation were positively associated with firm performance, both directly and indirectly through innovation capability. Researchers collected responses between January and April 2026 and used structural equation modeling to test those relationships in an emerging-market setting. The analysis evaluated the study’s measurement model and structural model with AMOS software.

Its proposed relationships connected intellectual capital, entrepreneurial orientation and innovation capability with firm performance. Both intellectual capital and entrepreneurial orientation had statistically significant positive associations with performance. Innovation capability also partially mediated the two relationships: each remained directly associated with performance in the model while innovation capability accounted for part of the corresponding indirect association.

The partial mediation result supports the study’s central proposition that innovation capability is a statistically modeled mechanism linking intellectual capital and entrepreneurial orientation to firm performance. Intellectual capital and entrepreneurial orientation retained positive direct paths to performance after the paths operating through innovation capability were included. The findings therefore distinguish the model’s direct associations from its innovation-related indirect associations, rather than treating innovation capability simply as another correlate of business outcomes.

Because the research was cross-sectional, it assessed relationships among the four variables at one survey point rather than tracking firms over time. The design does not establish that changes in intellectual capital, entrepreneurial orientation or innovation capability would cause a particular change in performance. Accordingly, the results show positive associations within the specified structural model and should not be read as definitive causal effects.

The study’s population consisted of 300 respondents, including owners, employees and managers, associated with micro and small enterprises in Ethiopia. Its findings apply to the surveyed firms and the variables measured in the proposed model. The authors describe the context as an emerging market and frame the work as a contribution to understanding how intangible resources and entrepreneurial strategic orientations relate to performance in resource-constrained economies.

They report that the statistical model supported both direct and indirect contributions through innovation capability, but the evidence does not quantify the size of those associations in the supplied material or establish how the findings might apply to firms outside Ethiopia.

Subject of Research: Cross-sectional analysis of innovation-mediated firm performance among Ethiopian micro and small enterprises

Article Title: Intellectual capital and entrepreneurial orientation influence firm performance through innovation capability among micro and small enterprises in Ethiopia

Article References: Workneh, B. A. (2026). Intellectual capital and entrepreneurial orientation influence firm performance through innovation capability among micro and small enterprises in Ethiopia. Discover Sustainability. https://doi.org/10.1007/s43621-026-04998-6

Image Credits: AI Generated

DOI: 10.1007/s43621-026-04998-6

Keywords: micro enterprises, small enterprises, Ethiopia, intellectual capital, entrepreneurial orientation, innovation capability, firm performance, structural equation modeling, mediation analysis, emerging markets, Intellectual, capital