Abstract

This paper reviews the literature in a thorough manner in a bid to propose a model proposing that Innovation (technological and non-technological) and Relational learning can greatly influence the performance of Small and Medium Enterprises (SMEs) in a developing country like Pakistan. On the basis of literature review, research hypotheses have been formulated. In order to test the hypotheses, Structural Equation Modeling (SEM) has been employed to analyze the study conducted in 352 SMEs in Pakistan. The proposed model leads to very useful insights as it proposes that SMEs must not ignore the importance of Innovation especially technological innovation and Relational learning in order to achieve higher performance. Results indicate that Technological Innovation and Relational Learning have a positive significant effect on firm performance; whereas the effect of non-technological innovation on firm performance has been found as insignificant. The paper concludes with the discussion of managerial implications and recommendations for future research.

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