Does financial availability sustain financial, innovative, and environmental performance? Relation via opportunity recognition

Abstract Traditionally, firms tend to incline toward financial performance and profitability to surge shareholder's wealth. In the modern day, in addition to financial performance, innovative and environmental performance has also become a central effort. However, all firms are not flourished in the achievement of financial, innovative, and environmental performance, particularly small‐ and medium‐sized enterprises (SMEs), which need adequate financial resources due to lack of resources and can search for opportunities to boost their performance. This research examines the role of financial availability in financial, innovative, and environmental performance with a mediating role of opportunity recognition. Empirical evidence is collected through structured questionnaires from 347 SMEs operating in the emerging market Pakistan. Hypotheses are tested in Analysis of a Moment Structure (AMOS) using structural equation modeling. Results indicate that satisfactory financial resources significantly contribute to financial and innovative performance but play an insignificant role in environmental performance as well. In addition, firms with enough financial capital recognize new opportunities significantly via opportunity recognition mediator, where partially mediating the relation between financial availability and financial/innovative performance. However, firms fully mediate the link between financial availability and environmental performance. Our research findings recommend CEOs and top managers to utilize their financial resources in an efficient way to achieve the advantage of the new opportunity recognition, superior financial, innovative, and environmental performance.