Purpose The objective of this study is to investigate the influence of innovation capability (IC) and strategic orientation (SO), mediated by strategic renewal (SR). Driven by dynamic capability theory (DCT), the study also examines how internal resources enable firms to renew their strategies to achieve competitive advantage (CA). Design/methodology/approach A quantitative, three-wave time-lagged research strategy was deemed appropriate. The study employed purposive sampling, and data were collected from 211 SMEs located in Riyadh, Makkah and the Eastern province of KSA through structured questionnaires at three intervals. The data were analysed through structured equation modelling (SEM) with Smart PLS 4. Findings The findings show that antecedents, strategic orientation and innovation capability significantly influence strategic renewal within SMEs, which in turn positively influences competitive advantage. In addition, strategic renewal was found to mediate the relationship between innovation capability and strategic orientation and competitive advantage. Research limitations/implications The study offers novel insights to theory through the extension of Dynamic Capabilities Theory (DCT) and outlines practical steps that SMEs and authorities need to integrate within SMEs to achieve Saudi Vision 2030. Originality/value This study contributes to the literature by extending the DCT to the context of Saudi Arabian SMEs, a relatively underexplored setting in strategic management research. It provides novel insights into how internal capabilities – specifically, innovation capability and strategic orientation – interact through strategic renewal to drive competitive advantage. By empirically testing this mediation model in alignment with Vision 2030 objectives, the research adds theoretical depth to DCT and offers a context-specific framework that bridges capability development and national transformation goals. This integrated approach has not previously been examined in the KSA SME sector.
Chouayb Larabi (2025) studied this question.