In recent years, there have been a number of studies, which have investigated the performance of small and medium-sized enterprises (SMEs). Good performing SMEs mean better socio-economic conditions as a result of increased employment opportunities and improved fiscal revenue (Lawless 2014). Hence, South African manufacturing SMEs welcome the support received from the government and other institutions, which facilitate their growth and development. Policy makers should recognise the peculiar needs of those SMEs with the potential for high growth and employment creation (Ngek & Van Aardt Smit 2013). Yet, for SMEs to grow and thrive, much more is required than support from the government. Entrepreneurs and SME managers should also know the kind of capabilities their business require in order to move from one point to the next. Innovative start-ups, which are future job-creating enterprises (Kuckertz et al. 2020), should equally be cognisant of such capabilities.

The socio-economic contribution of small and medium enterprises is well documented in the literature, especially in the areas of job and wealth creation (Lawless 2014; Mafini, Pooe & Loury-Okoumba 2016; Ngek & Van Aardt Smit 2013). For SMEs to continue making such contribution, they need to keep improving their performance in the face of shrinking markets and growing competition (Prasanna et al. 2019). This calls for SMEs to expand their markets by exploring export opportunities and by constantly innovating their products and services, as well as their operational processes (Golovko & Valentini 2011; Zortea-Johnston, Darroch & Matear 2012). Yet, for SMEs to grow their markets and innovate, they need to improve their learning ability through absorptive capacity and knowledge management capabilities (Bagheri et al. 2019; Martin & Javalgi 2019).

In this study, absorptive capacity and knowledge management are regarded as the learning capabilities that must be built in order to strengthen the operational effort to positively influence firm performance. Entrepreneurial competence has also been identified as pivotal in achieving organisational performance goals; it is unique to the specific entrepreneur and organisational setting. South African manufacturing need to learn to harvest or extract knowledge management routines and practices necessary for transforming knowledge inputs into performance-enhancing outputs (Abbariki, Snell & Easterby-Smith 2017:57; Barbero, Casillas & Feldman 2011:673). The dynamic capabilities view offers a framework or a perspective, which depicts how resources (such as knowledge or entrepreneurial competence) are utilised and configured as routines and practices that constitute organisational capabilities (Mohamud & Sarpong 2016:511; Teece 2014:17).

As SMEs largely depend on their owners, who are often entrepreneurs, their skills and competencies cannot be overemphasised for the success of their business. Surviving and thriving under these competitive pressures call for constantly embracing new ways of thinking and working (Joynes, Rossignoli & Fenyiwa Amonoo-Kuofi 2019). The shrinking local markets constantly challenge SMEs and their owners to increase their horizon and explore markets beyond their own geographical boundaries for potential growth and expansion (Gherghina et al. 2020). In this regard, Alves et al. (2020:5) posit that SMEs active in international trade outperform those that do not. This indicates that SMEs can do well to engage in activities that will enable them to internationalise, as this will enhance competitiveness.

While there were many other studies that examined permutations of sections of these relationships, for example, the link between absorptive capacity and innovation (Ali, Kan & Sarstedt 2016; Enkel et al 2017), or the effect of exports and innovation on firm performance (Golovko & Valentini 2011; Kafetzopoulos & Psomas 2015), or how learning determines export orientation and affects export performance (Huang et al. 2018), this is the first study that has attempted to put all these variables together in a model to examine the outcome on firm performance for South African SMEs. Hence, this study explores the influence of organisational learning capability (absorptive capacity, knowledge management capability and entrepreneurial competence) on the innovation capacity, export orientation and SME performance. Figure 1 illustrates the conceptual framework for this study.

Based on the conceptual research model, the following hypotheses are stated:

Nonaka’s ‘theory of organisational knowledge creation’ (Nonaka & Nishihara 1994) best frames the discussion on organisational learning as encapsulated by the knowledge management and absorptive capacity concepts. Knowledge creation theory starts with a reflection on the iterative relationship between tacit and explicit knowledge in an organisation. It also considers how the sharing of knowledge between individuals and across departments (referred to by Omidvar 2013:13, as ‘boundary spanning’) gives rise to the development of new and innovative ideas. In this study, absorptive capacity and knowledge management are regarded as the learning capabilities that must be built in order to strengthen the operational effort to positively influence firm performance. Learning is pivotal to the organisation’s ability to understand its own strengths and weaknesses and the opportunities and threats existing in the external environment. Without the ability to ‘sense and seize’ opportunities (Teece 2007:1322), businesses, and SMEs in particular, have little chance to perform, grow and survive.

The ‘sensing of opportunities’ capability requires both externalisation of organisational learning (i.e. making the tacit explicit); the acquisition and systematising of new knowledge from a variety of external sources including suppliers and customers and through research and development efforts (in other words, a knowledge management process) and an integration of new and existing knowledge, requiring absorptive capacity. Furthermore, management attention must be focused to allow for searching beyond the firm’s existing knowledge perimeters (Teece 2007:1326). Here, there is a need for entrepreneurial competence based on an attention focus choice (Gebauer 2009:83). In this study, learning capabilities (as reflected by absorptive capacity and knowledge management) and entrepreneurial competence are the high-level tools deployed at a higher level to create operational capabilities that will lead to outputs that will, in turn, produce positive firm performance outcomes. These high-level tools are also referred to as dynamic capabilities in terms of the dynamic capabilities view, which helps us to understand how capabilities can be built so that firm performance outcomes can be realised.

This study adopted a quantitative approach within a positivistic research paradigm. The study employed a survey as the research design with a sample of 400 SMEs. The study used purposive sampling, where several SME databases were used to compile the sample. These databases include the SA Electrotechnical Export, the SA Cosmetics Export Council, the SA Capital Equipment Export Council, Cape Furniture Makers, Olive Nurseries, Fruit producers, Furntech incubates, Steel tube manufacturers, Solar PV manufacturers, SA Boatbuilders, SA National Halaal Authority (food & beverage manufacturers), the Black Business Council in the Build Environment, SA Flower Growers and Flower Export Council, SA Footwear and Leather Industries association, SA Canning industry (fresh product processing and canning) and a group of Department of Trade & Industry’s trainees SMEs in their export readiness programme, mainly in manufacturing and agriculture.

Direct web links via Survey Monkey were sent to an email list of 400 SMEs between August and November 2020. Data collection involved three waves until 231 self-administered questionnaires were received, of which 207 were suitable for data analysis, resulting in a response rate of 52%. The questionnaire used in the study was adapted from previously validated instruments: absorptive capacity (Wu & Voss 2015), knowledge management (Cerchione & Esposito 2017), entrepreneurial competence (Man et al. 2008); export orientation (Eliasson et al. 2012; Gubik & Bartha 2014), innovation capacity (Doroodian et al. 2014) and firm performance (Arend 2014; Kafetzopoulos & Psomas 2015). The questionnaire was pre-tested with four academics who are experts in the area of entrepreneurship. As a result, some items in the questionnaire were adapted for better clarity for local respondents. A five-point Likert scale questionnaire was used. Exploratory factor analysis (EFA), confirmatory factor analysis (CFA) and structural equation modelling (SEM) were used for data analysis using IBM SPSS Amos version 26.

As shown in Table 1, half of the respondents were founders or owners, followed by executive managers and departmental managers. Fifty-four per cent of businesses have been in operation for more than 10 years, followed by 19% in business for 2–5 years, 15% between 5 and 10 years, while 11% have been in operation for less than 2 years. A business is considered established if it has been in existence for 42 months (Bosma et al. 2020). This is important for this study, as the target population was manufacturing-based SMEs and to become established as a manufacturing operation requires time, has a bearing generally on firm survival and for the building of capabilities such as export orientation and innovation capacity, time in operation is important.

The conceptualised research model (Figure 1) proposed that entrepreneurial competence, absorptive capacity and knowledge management each have a positive and significant relationship with export orientation and innovation capacity, respectively, and that export orientation and innovation capacity each have a positive and significant relationship with firm performance. Table 8 shows the hypothesised relationships and regression weights, where the significant effect of variables EC, AC and KMC is indicated by a CR (or z) value of > 1.96 (Ho 2013:298; Suhr 2008:2) at p < 0.001 level of significance.

The results in Table 8 indicate that out of the eight hypotheses, six were supported at 0.01 significance level. H1 stated that there is a positive and significant relationship between AC and EO, and the results show a beta coefficient of (β) 0.307 at p < 0.001. This implies that H1 was supported. Similarly, H2, H3 and H4 with β values of 0.183, 0.033 and 0.357, respectively, were supported. However, H5 and H6 were not supported. These predicted a positive and significant relationship, and the results indicate β values of −0.186 and −0.045 for the two hypotheses, respectively. Also, the results were not statistically significant as H5 had a p value of 0.013 and 0.544 for H6. Regarding H7 and H8, these hypotheses were both supported at β values of 0.263 and 0.151, respectively.

The data show that absorptive capacity bears a positive relationship with export orientation (the CR or z value is 3.395 at p < 0.001 level of significance). Absorptive capacity was posited as an important capability for an SME to position itself for the export activity and market in this study. With SMEs seeking to enter the export market faced with a number of challenges as they begin to explore unchartered waters, the study found that the ability to learn and assimilate new knowledge will stand SMEs in good stead as they expand their markets beyond the present boundaries.

The study hypothesised a positive and significant relationship between absorptive capacity and innovation capacity for SMEs. The results show that absorptive capacity bears a positive relationship with innovation capacity (CR or z value is 2.072 at p < 0.001 level of significance). Thus, this study presupposed that as a transformative learning process, absorptive capacity enables the innovation process, which according to the literature starts with a creative idea to develop useful or marketable outputs (Gebauer et al. 2012; Molinari et al. 2014). Through the primary data, this study confirmed a positive and significant relationship between absorptive capacity and innovation capacity, which is in line with other studies (Ali et al. 2016; Enkel et al. 2017; Engelman et al. 2017). The findings in this study suggest that integrating new information with the existing knowledge, which is an important characteristic of absorptive capacity, will lead to improved capacity to innovate.

The study postulated that there is a positive and significant relationship between knowledge management capability and export orientation. The results indicate that knowledge management capability bears a positive relationship with export orientation (the CR or z value is 0.388, at p < 0.001 level of significance). To avoid the overlap of meaning between absorptive capacity and knowledge management in terms of knowledge acquisition and use, knowledge management was used in this study with specific reference to the practices and tools deployed to allow for knowledge creation conversion (Cerchione & Esposito 2017). The results indicate that learning is important for the development of an export orientation as well as later on, when the exporter is learning by exporting. The results also showed that knowledge management has a positive relationship with innovation capacity (CR or z value is 3.745 at p < 0.001 level of significance). These results confirm findings from previous studies, which found that knowledge management is positively associated with innovation, and that knowledge management supports the innovation strategy (Gonzalez & Martins 2014; Li et al. 2014; Martín-De Castro 2015). The study enhanced the understanding of the importance of the knowledge management infrastructure to be in place if SMEs are to improve their innovation capacity.

The analysis showed that entrepreneurial competence is not a significant predictor of export orientation (the CR or z value was −2.483). A few empirical studies (Fernández-Mesa & Alegre 2015; Game & Apfelthaler 2016; Kuivalainen et al. 2010) have found a positive relationship between entrepreneurial competence and export orientation, often based on the entrepreneur’s own international experience, knowledge and outlook towards trading beyond domestic borders. The findings from this study, however, point to a significant but negative relationship between entrepreneurial competence and export orientation. The findings could suggest that the more competent the entrepreneur feels, the more they believe that they can exploit and rely on local opportunities and the less likely that their export orientation will grow. Increased focus on the local market would be at the expense of their SME export orientation.

Again, the study hypothesised a positive and significant relationship between entrepreneurial competence and innovation capacity. The results showed that entrepreneurial competence is not a significant predictor of innovation capacity (CR or z = −0.607). Interestingly, the findings point to a negative relationship between entrepreneurial competence and SME innovation capacity. Entrepreneurial competence involves competence in decision making, task auctioning and building organisational capabilities (Man et al. 2002, 2008). While these tasks may be relevant to building innovation capacity through the entrepreneur’s ability to contribute knowledge and technology management, idea management, project management and commercialisation ability (Doroodian et al. 2014), it would seem from the results of this study that there is more to innovation capacity than entrepreneurial competence. Put differently, it is possible that the relationship between entrepreneurial competence and innovation capacity needs to be mediated. As Lechner and Gudmundsson (2014) aver, decisions about developing innovation capacity are derived from the firm’s overall strategy for competitiveness, which is driven by entrepreneurial competence in executing the aforementioned entrepreneurial tasks.

The analysis showed that innovation capacity has a positive impact on firm performance (CR or z value is 3.278 at p < 0.001 level of significance). The literature indicates a positive relationship between innovation capacity and firm performance despite the cost of investment in innovation (Braga & Braga 2013; Jiménez-Jiménez and Sanz-Valle, 2011; Kafetzopoulos & Psomas 2015). To strike a balance between innovation costs and positive performance effects, Buddelmeyer et al. (2010) emphasised the importance of innovation capacity, as illustrated by the fact that trademarks and patents are registered to provide protection for the firm from intellectual property theft.

The analysis showed that export orientation has a positive impact on firm performance (CR or z value is 2.030 at p < 0.001 level of significance). This result supported what was put forward by Navarro-Garcia et al. (2015) that when export orientation was conceptualised as a conscious effort to seek foreign market opportunities, it was found to enable accelerated internationalisation, which, in turn, showed positive firm performance effects. When export orientation was conceptualised as the growth in the domestic footprint as indicative of the ability to expand abroad (Fernandez-Ortiz et al. 2015), a positive effect on firm performance was predicted on the basis that growth in the domestic market as a positive firm performance indicator leads to an export commitment, which is described as the satisfactory achievement of export sales targets over a three-year period following the export entry.

The results of this study indicated that absorptive capacity and knowledge management capabilities are certainly significant capabilities that should be embedded in the SME business, in view of their role in positively influencing the development of export orientation and innovation capacity, and that the influence of entrepreneurial competence is not significant enough. Based on the foregoing, this study’s findings extend Ocasio’s (1997) principle of distributed focus of attention and wish to posit a possible new theory called SME Export and Innovation Attention Theory. This yet-to-be developed theory postulates that the success of the export orientation and innovation capacity of SMEs should be based on the distributed resources, capabilities and knowledge across the SME and not on the entrepreneurial competence of the owner. This theory suggests that once the SME wishes to expand its market across the borders and decides to invest in its innovation capacity, it is time that the entrepreneur or founder or owner relinquishes his or her power to the rest of the business. The findings of this study may also go a long way in shedding light into the entrepreneurship growth theories, which in part seek to understand at what point the entrepreneur should involve a team in moving the business strategy forward as many seem to keep holding on because of the financial and emotional attachment to the business.

The study’s findings point to the fact that entrepreneurs should depend less on their own competence and skills to position their SMEs for the export market and innovation and should rather mobilise, configure and deploy resources, such as knowledge, and build organisational capabilities such as knowledge management and absorptive capacity capabilities. To that end, entrepreneurs need to make present-time investments in productivity, which is critical for future export behaviour, as the firm needs to improve its profitability in order to be able to absorb the future cost of learning about and undertaking global ventures

Having reflected on the findings of this study, a number of recommendations are proffered. Firstly, the study recommends that given the nature and amount of information flows, SMEs seek for opportunities that improve their ability to assimilate, learn and use new knowledge and information pertinent to their businesses. Recognising the value of new knowledge and information from within and between individuals, departments and units is a key step in enhancing absorptive capacity. To that end, it is vital for SMEs to put in place coordination mechanisms. This necessitates the establishment of a knowledge management system, which forms part of the ICT infrastructure. Such a system will enable an SME to organise and distribute its body of knowledge to the right people at the right time. Improved absorptive capacity and knowledge management capability will likely lead to enhanced export orientation and innovation capacity and business performance, as shown by the results of this study.

The study also recommends that although an entrepreneur or the founder of the business generally wields the most influence concerning the strategic direction of the SME, his or her entrepreneurial competence may not be sufficient if the SME needs to embark on innovative projects or venture into the export market. This is because the findings have shown a negative relationship between entrepreneurial competence and export orientation and innovative capacity. Thus, it is vital for such capabilities to be spread across the SME and not be limited to one person. Investment in improving absorptive capacity and knowledge management capability of the SME would be a better choice as the study has already confirmed a significant and positive relationship between absorptive capacity and knowledge management capability, on the one hand, and export orientation and innovation capacity and SME performance, on the other hand.

Like many studies, this one has not been without its limitations. The absence of one sample frame made it impossible to employ a probability sampling as originally desired. Consequently, purposive sampling was used, which means that the results of this study cannot necessarily be generalised but can only be limited to the selected sample. As the study adopted a quantitative approach using a survey, the researcher naturally missed on the thick descriptions that would otherwise have been offered had the study adopted a mixed method where the qualitative aspects would also have been considered. Future studies could adopt a longitudinal study where export orientation and innovation capacity are observed over time. An unexpected finding of a negative association between entrepreneurial competence and SME export orientation and innovation capacity makes for an interesting exploration. The model could be further expanded by investigating technology adoption as a mediator for export orientation and innovation capacity.