Driving SME Performance through Absorptive Capacity: An Empirical Analysis

Kule Julius Warren
Department of Business Administration, Faculty of Commerce
University of Eswatini
Private Bag 4, Eswatini
ORCID – https://orcid.org/0000-0003-3029-7899
Email: kulewarren@gmail.com

Abstract: Absorptive capacity, the ability of firms to acquire and utilise external knowledge, is essential for enhancing performance in small and medium enterprises (SMEs). Despite its importance, empirical studies focusing on this relationship within the SME context are scarce. This research addresses this gap by investigating how absorptive capacity influences SME performance, specifically examining the dimensions of knowledge acquisition, assimilation, and applying. Data was collected from 206 managers and owners of SMEs in the Manzini region using a self-administered questionnaire, employing a cross-sectional design. The analysis utilised Pearson’s correlation coefficient to test the proposed hypotheses. The findings reveal a significant positive correlation between absorptive capacity and SME performance, with knowledge transformation and application identified as the most impactful dimensions. This study contributes to the literature by providing empirical evidence of the critical role of absorptive capacity in driving SME performance. It emphasises the need for SMEs to invest in knowledge management and collaborative practices to enhance their absorptive capacity. The results also offer practical implications for policymakers to create supportive environments that foster knowledge exchange and innovation, ultimately aiding in the growth and competitiveness of SMEs.