Does customer orientation mediate the relationship between knowledge-based dynamic capability and the competitive performance of SMEs in India?

Purpose This paper aims to examine the mediating effect of customer functional and relationship customer orientation on the relationship between the knowledge-based dynamic capabilities and the competitive performance (CP) of small and medium enterprises (SMEs) operating in India. Design/methodology/approach The hypotheses proposed for this study were tested using data from the proprietors and competent authorities of 441 sample SMEs using structural equation modelling with partial least squares. Findings The results of this study indicate that knowledge-based dynamic capability (KBDC) has a significant connection with the CP of SMEs in a growing economy such as India. In addition, this study confirmed that the connection and functional customer orientation partially mediate the association between knowledge-based dynamic capabilities and the CP of SMEs. Practical implications This study’s practical contribution lies in its investigation of whether customer orientation serves as a mediator between KBDC and CP in SMEs in India. For instance, SMEs can implement strategies like customer feedback loops, loyalty programmes and customized solutions based on market insights to enhance customer orientation and ultimately improve CP. Originality/value This study analyses how SMEs can use knowledge-based dynamic capabilities and customer orientation to obtain a competitive advantage. This research contributes to the existing literature on knowledge management by expanding the notion of KBDC by integrating functional and relational customer orientation.