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

Abstract

This study examines how Entrepreneurial Orientation (EO) contributes to Sustainable Competitive Advantage (SCA) among small and medium-sized enterprises (SMEs) in Riyadh, Saudi Arabia, and whether Open Innovation (OI), reflected through product and process innovation, mediates this relationship. Drawing on the Resource-Based View, Dynamic Capabilities Theory, and Open Innovation Theory, EO is conceptualized through proactiveness, risk-taking, autonomy, and competitive aggressiveness. Data were collected from SME owners, founders, and senior managers using a structured questionnaire and analyzed through multiple regressions and bootstrapped mediation analysis using Hayes' PROCESS Macro. EO is positively associated with both OI and SCA, while OI also contributes positively to SCA. Product and process innovation partially mediate the relationships between all EO dimensions and SCA. Proactiveness and competitive aggressiveness display the largest associations with SCA in the separate dimension-level models, whereas risk-taking has a comparatively moderate effect. The findings show that entrepreneurial behavior yields stronger competitive outcomes when translated into concrete innovation activities. The study extends EO and OI research to an underexplored Gulf context and highlights the importance of opportunity sensing, employee autonomy, disciplined experimentation, external collaboration, and continuous process improvement for strengthening SMEs' sustainable competitive advantage.