Effect of Strategic Orientation on Competitive Advantage: Mediating Role of Innovation

Abstract

It has become necessary for organizations to address innovation and gaincompetitive advantage. Among SMEs, strategic orientation plays important role in building innovative capabilities and determining competitive advantage. Hence, this research tests mediating role of innovation between strategic orientation factors and competitive advantage. For testing its hypotheses, this study took data from software houses based in Pakistan. It is because software and IT industry has been progressing over here and scholars also believe that software innovation requires companies and their constituent partners to spend in new methodologies and processes to attain competitive advantage. Based on sample of 61 software houses, the study concludes that innovation acts as mediator between entrepreneurial orientation and competitive advantage. Further, it reveals that technology orientation positively affects innovation and negatively affects competitive advantage, whereas market orientation positively affects competitive advantage. Interestingly, no relation was discovered between learning orientation, innovation, and competitive advantage. The study adds information to relevant theories as discussed in literature and presents guidelines for software houses for managing their strategic orientation and prioritizing those factors.