Moderating effect of relational learning and business environment on innovation capability, total quality management and SMEs Performance

The main aims of this study were to examine the moderating effects of the business environment, and relational learning on the relationship between innovation capability (IC), total quality
management (TQM), and performance of small and medium enterprises (SMEs) in the Electrical Fan Industry of Pakistan. Data were collected using the cross-sectional study design. The study employed the systematic random sampling procedure to generate a list of 300 respondent firms. Structured questionnaires were distributed to the randomly selected SMEs and 239 useable responses were collected through the personally-administered survey method. Partial Least Squares Structural Equation Modeling (PLS-SEM) was used to test the study hypotheses. The findings reveal that there is no significant relationship between Innovation Capability and SMEs’ performance. However, there is a positively significant relationship between TQM and SMEs’ performance. Furthermore, business environment neither moderates the relationship between innovation capability and SMEs’ performance, nor the relationship between TQM and SMEs’
performance. However, relational learning significantly moderates the relationship between innovation capability and SMEs’ performance as well as the relationship between TQM and SMEs’ performance. The results of this study provide important insights to owner-managers, policy-makers and researchers to further understand the effects of innovation capability, TQM, business environment, and relational learning on SMEs’ performance. Policy-makers should emphasize on relational learning to augment their innovation capability and TQM practices in order to enhance SMEs’ performance. Lastly, limitations of the current study and avenues for future research are discussed.