Innovation and knowledge management capabilities as determinants of financial performance in technology-based small businesses in South Africa

Abstract

Background: Calls continue to grow for a deeper understanding of the capabilities that drive the performance of small businesses. This is especially important in emerging nations where the promotion of digitalisation is a key policy and developmental focus.
Objectives: This study investigates the determinants of small business performance by examining the role of innovation and knowledge management capabilities within the South African context. The focus is on technology-based small businesses.
Method: A structured questionnaire was administered to a sample of 261 respondents drawn from four key provinces in South Africa. All participating firms operated primarily as technology-based enterprises. Hypotheses were tested using inferential statistical techniques.
Results: The results reveal a significant and positive relationship between innovation capability and knowledge management capability. Additionally, knowledge management capability was found to mediate the relationship between innovation capability and financial performance.
Conclusion: These findings highlight the critical role of innovation and knowledge management capabilities in enhancing small business financial performance, particularly in digitally driven environments.
Contribution: The study offers insights for academics and practitioners seeking to leverage innovation and knowledge practices to improve competitiveness and support digital transformation in small firms.