Business clusters and SMEs' sustainable performance in emerging markets: examining the roles of open innovation and digital capacity

Purpose: This study aims to develop a framework for the sustainable performance (SP) of small and medium enterprises (SMEs) that will benefit emerging markets by emphasizing the roles of open innovation (OI) and digital capacity (DC) within a business cluster. Thus, the research investigates how social capital theory (SCT) and diffusion of innovation theory (DOI) within a cluster can facilitate the SP of SMEs.

Design/Methodology/Approach: The study employed a confirmatory research design and Partial Least Squares Structural Equation Modelling (PLS-SEM). It analyzed 583 Nigerian SME owners/managers. SP was measured using environmental, social, and economic performance, while coexisting, business support, and knowledge sharing were used to measure cluster support (CS), all of which are essential factors in understanding the overall impact of SMEs on their communities and economies. OI was measured using both inbound and outbound open innovation (OI) methods.

Findings: CS, OI, and DC impact SMEs’ SP within clusters. The evidence reveals the innovative potential of SME clusters and the role that SCT and DOI play in helping SP through OI and DC, indicating that CS is critical to OI. The finding highlights the role of clusters in facilitating collaborative innovation, particularly by enabling SMEs to leverage shared resources and knowledge to achieve more innovative outcomes. Findings also indicate that DC is vital for SMEs’ SP.

Research Implication: The study provides data to inform decisions on sustainability in SME clusters, benefiting SMEs, researchers, policymakers, and practitioners. SMEs in clusters can leverage the ecosystem’s collaborative potential to enhance OI practices across developing countries. This is significant for policy and practice in developing countries seeking to optimize SMEs’ SP.

Originality/Value: This study fills a gap in the literature by exploring how DC and OI can enhance SMEs’ SP within a cluster. The integration of SCT and DOI in clusters for SMEs’ SP is also a novel contribution of the study.