The relationship between distinctive capabilities system, learning orientation, leadership and performance

Purpose This paper conceptualised the distinctive capabilities system and tested its relationship between small and medium enterprise (SME) non-financial and financial performance, encompassing leadership and learning orientation as mediators, moderators and moderators’ mediators. Design/methodology/approach The research design is exploratory, quantitative and cross-sectional. The study employed partial least squares path modelling for testing the direct, mediation and moderation effects, and, for testing moderated mediation, the author adopted PROCESS analysis. Before testing the hypotheses, a confirmatory factor analysis procedure was applied to the measurement model validity test. Findings Our empirical findings confirm that (1) learning orientation has a positive and significant implication as a moderator between the distinctive capabilities system and SME performance; (2) the distinctive capabilities system has a significant relationship with leadership and learning orientation, and leadership has a significant relationship with learning orientation and (3) the distinctive capabilities system has no direct impact on performance. These findings suggest that, by nature, the distinctive capabilities system has an indirect impact on SME performance, which must be understood as a consequence of living “far-from-equilibrium” and being forced to learn and adapt to come up with better market configurations. Originality/value This study intends to contribute to the existing literature in three ways: (1) it proposes the distinctive capabilities system definition; (2) it highlights the system’s features and benefits that make it a core construct for SMEs surviving and thriving and (3) it shows the causal relationship between the leadership capability and learning orientation and the distinctive capabilities system and performance.