The role of competitor orientation and proactiveness in competitive advantage for small- and medium-sized enterprises performance

Abstract

Background: As small- and medium-sized enterprises (SMEs) are the primary source of job creation in Nigeria and contribute 48% of the country’s gross domestic product (GDP), their performance must be enhanced and sustainability ensured. The article suggests that through competitor orientation and proactiveness, SME managers and owners can achieve competitive advantage which ultimately promotes firm performance.Aim: The article aims to examine how competitor orientation and proactiveness in competitive advantage enhance the performance of SMEs in Nigeria.Setting: The study focused on registered SME owners and managers who are operating in Nigeria, using Lagos State as a case study.Methods: This study was conducted through administering questionnaires to owners and/or managers of SMEs as the unit of analysis. A quantitative research design was used with stratified and simple random sampling as the sampling method, with the sample comprising 100 SME owners and/or managers.Results: The results of the study indicated that competitive advantage mediates the relationship between competitor orientation, proactiveness and SMEs’ performance indirectly. It further revealed that competitor orientation and proactiveness have significant effects on SMEs’ performance.Conclusion and contribution: The article reveals how competitive advantage, which is influenced by competitor orientation and proactiveness, contributes to increased SMEs’ performance in SME sectors. Thus, to gain a competitive edge over their rivals, the study recommends that SME owners and managers consider competitor orientation and proactiveness more seriously, as these factors ultimately boost their performance.

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The Southern African Journal of Entrepreneurship and Small Business Management
ISSN: (Online) 2071-3185, (Print) 2522-7343
Page 1 of 11 Original Research
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Authors:
Jeremiah Ayodele
Ogundare1
Stephan van der Merwe1
Aliaon:
1North-West University
Business School, Faculty of
Economics and Management
Sciences, North-West
University, Potchefstroom,
South Africa
Corresponding author:
Jeremiah Ogundare,
ayogundare88@gmail.com
Dates:
Received: 02 Aug. 2023
Accepted: 22 Nov. 2023
Published: 19 Feb. 2024
How to cite this arcle:
Ogundare, J.A. & Van der
Merwe, S., 2024, ‘The role of
competor orientaon and
proacveness in compeve
advantage for small- and
medium-sized enterprises
performance’, Southern
African Journal of
Entrepreneurship and Small
Business Management 16(1),
a786. hps://doi.org/10.4102/
sajesbm.v16i1.786
Copyright:
© 2024. The Authors.
Licensee: AOSIS. This work
is licensed under the
Creave Commons
Aribuon License.
Introducon
Business experts, practitioners, governments and international organisations are increasingly
concerned about the performance of small- and medium-sized enterprises (SMEs). Aminu (2015)
has shown that SMEs are crucial for economic growth in both developed and developing countries.
A more open environment and increased participation in the digital revolution benefit SMEs,
which play an important role in the economy and in the broader business ecosystem, allowing
these enterprises to prosper and contribute to meaningful economic growth (Cusmano, Koreen &
Pissareva 2018).
Small- and medium-sized enterprises account for a third to half of total private sector revenue in
most countries and are the primary source of new jobs and economic activity (Aminu 2015). They
play an important role in economic development, innovation and social well-being (Broughel &
Thierer 2019). The contribution to gross domestic product (GDP) and job creation in Nigeria and
other nations is mostly accounted for by SMEs, especially in Lagos State, which is the context
within which the current research has transpired (Aminu 2015). In 2015, the former Nigerian
minister of commerce, industry and investment indicated that SMEs in Nigeria have contributed
to GDP highly and created new jobs in the country. In 2018, for instance, SMEs accounted for
56% of China’s GDP and was responsible for 56% of India’s GDP and 32% of total exports.
Background: As small- and medium-sized enterprises (SMEs) are the primary source of job
creation in Nigeria and contribute 48% of the country’s gross domestic product (GDP), their
performance must be enhanced and sustainability ensured. The article suggests that through
competitor orientation and proactiveness, SME managers and owners can achieve competitive
advantage which ultimately promotes firm performance.
Aim: The article aims to examine how competitor orientation and proactiveness in competitive
advantage enhance the performance of SMEs in Nigeria.
Setting: The study focused on registered SME owners and managers who are operating in
Nigeria, using Lagos State as a case study.
Methods: This study was conducted through administering questionnaires to owners and/or
managers of SMEs as the unit of analysis. A quantitative research design was used with
stratified and simple random sampling as the sampling method, with the sample comprising
100 SME owners and/or managers.
Results: The results of the study indicated that competitive advantage mediates the relationship
between competitor orientation, proactiveness and SMEs’ performance indirectly. It further
revealed that competitor orientation and proactiveness have significant effects on SMEs’
performance.
Conclusion and contribution: The article reveals how competitive advantage, which is
influenced by competitor orientation and proactiveness, contributes to increased SMEs’
performance in SME sectors. Thus, to gain a competitive edge over their rivals, the study
recommends that SME owners and managers consider competitor orientation and
proactiveness more seriously, as these factors ultimately boost their performance.
Keywords: competitive advantage; competitor orientation; proactiveness; SMEs’ performance;
small- and medium-sized enterprises.
The role of competor orientaon and proacveness
in compeve advantage for small- and
medium-sized enterprises performance
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Furthermore, in South Africa, SMEs account for 52% GDP
International Labour Organization (ILO, 2023). Thus, there is
no universally accepted definition of ‘SME’.
The term SMEs encompasses micro, small, medium and large
enterprises (Mohammed et al. 2022). Thus, the Small and
Medium Enterprise Development Agency of Nigeria and the
National Bureau of Statistics (SMEDAN and NBS) classify
SMEs into categories. The micro enterprises are those with
asset base of not more than ₦1.5 million excluding cost of
land, but including working capital and an employee of not
more than 10. Furthermore, small enterprises are those with
asset base of more than ₦1.5 million, but in excess of
₦50 million excluding cost of land, but including working
capital and/or an employee from 11 to 100. Again, medium
enterprises are those with asset base of more than ₦50 million,
but not in excess of ₦200 million excluding cost of land but
including working capital and/or an employee from 101 to
300 (Ibrahim & Abu 2020).
Roughly 60 million Nigerians are employed by SMEs and,
according to the president of the Association of Small
Business Owners (ASBON), these businesses have
contributed between 48% and 50% of GDP during the
previous 5 years (David et al. 2021). In Nigeria, the significant
role played by the sector is clearly shown in the SMEDAN
and NBS 2017 survey report documented by Akinwale (2018),
which indicates that the economy is largely accounted for by
SMEs as they make up close to 90% of businesses in the
country. In addition, this sector accounts for 84% of the
country’s employment (ILO 2023). This may be the reason
why stakeholders such as the Central Bank of Nigeria and
other Development Institutions continue to provide
interventions to boost the sector in Nigeria. However, despite
these interventions, Nigerian SMEs are still behind on the
path of growth as a result of massive challenges facing the
sector. Among the challenges include poor electricity, bad
road network, lack of access to loans, etc., may seem
interrelated, but access to finance is the most critical for take-
off and expansion of businesses (Ibrahim & Abu 2020).
In today’s business environment, SMEs need to gain a
competitive advantage in others to perform adequately
(Aminu 2015). The literature asserts that focusing on a
competitive advantage not only improves performance but
also increases a company’s ability to endure over time
(Aminu 2015). Entrepreneurial and market-oriented SMEs,
especially those operating in developing nations like Nigeria,
must continually be competitively oriented and proactive to
achieve high performance and survive within commercial
rivalry (Sirajuddin, Arif & Jayadi 2017).
Furthermore, SMEs that require to be competitive within a
business environment to achieve high performance must be
competitively oriented and positively minded to survive in a
business environment. Thus, competitor orientation is a
dimension of market orientation (Ejdys 2015; Matsuno,
Mentzer & Özsomer 2002) and concerns efforts taken by
organisations to identify their competitors’ vulnerabilities,
capabilities, chances for growth and the techniques they
use to outwit their rivals (Leal-Rodríguez & Albort-
Morant 2016). Proactiveness, one of the dimensions of
entrepreneurial orientation (Milovanović, Primorac & Kozina
2016), also refers to a firm’s ability to establish and maintain
a competitive edge over its rivals and depends heavily on its
ability to adopt a proactive mindset (Racela 2014).
Purpose of the study
The present article explores the link between competitor
orientation, proactiveness (as independent variables) and
competitive advantage (mediating variable) to establish the
performance of SMEs (as dependent variable).
A limited number of studies (Talaja et al. 2017; Zeebaree &
Siron 2017) have investigated the role of competitor
orientation and proactiveness in competitive advantage
to ultimately promote firm performance. However, little
attention has been paid to this phenomenon (Byukusenge,
Munene & Orobia 2016; Haider, Asad & Fatima 2017;
Hussain, Rahman & Shah 2016). This study therefore
aimed to contribute to the body of knowledge by focusing
on one model that examines the roles of competitor
orientation and proactiveness (independent variable) in
competitive advantage, which is the predictor variable, for
the performance of SMEs (dependent variable).
Structure of the arcle
Following on this introduction, the article will present the
review of the literature, followed by the theoretical framework
upon which the research question hinges.
The next section will be the research methods that were used
to collect and analyse the data; this will be followed by a
presentation and discussion of the results and how they link
to the literature.
Finally, the study will present a conclusion drawn from the
results and areas for possible future research.
Literature review
The section discusses the concepts of SME performance,
competitive advantage, competitor orientation and
proactiveness. It also reviews the relationships between
competitor orientation and SME performance as well as
proactiveness and SME performance. The study finally
discusses the theory underpinning the study and raises
hypotheses supporting the study.
Concepts of small- and medium-sized
enterprises’ performance
Small- and medium-sized enterprises’ performance is an
organisation’s ability to adapt to the business environment
and develop a good strategy that complements management’s
ability to create harmony between the environment
and internal company (Zainudin & Sugiono 2016).

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Organisation performance has also been explained as the
capability of firm to accomplish its goals and objectives with
the help of talented administration, good governance and
have a constant rededication to accomplish business
objectives. As far as SME performance is concerned, it can be
perceived from two perspectives: judgemental performance
and objective performance (Zainudin & Sugiono 2016). Tuan
et al. (2016) argued that SME performance can be identified
as a multidimensional concept that can be measured by three
indicators: production, finance and marketing. Bamfo and
Kraa (2019) concluded that firms that have more propensity
to compete are the largest, with high competitive orientation
and proactive minds that lead to market share. Researchers
such as Bamfo and Kraa (2019) and Ordanini, Parasuraman
and Rubera (2014) have indicated that judgemental measures
of performance are significant to profitability, whereas
objective measures of performance throw more light on
profitability in most service organisations. One of the most
effective strategic options available to the firm in dealing
with environmental issues that affect SME performance is
competitor orientation and proactiveness of the organisation
(Bamfo & Kraa 2019).
Performance is seen as the desire to evaluate the extent of
success an organisation has achieved, be it a large or a small
organisation (Akande 2011). Businesses can be evaluated on
the basis of their size, number of employees, working capital
and profitability. Lately, researchers such as Tuli and Skiera
(2017) and Cacciolatti and Lee (2016) have paid increasing
attention to how an organisation improves performance in a
business environment. However, the definition of SMEs’
performance varies, as most of the researchers used the term
performance to state the collection of measurement of input
and output efficiency and transactional efficiency (Lopez
et al., 2005). There are measures used to evaluate the
performance of a business. Some used objective performance
measures of return on equity (ROE), sales growth and return
on asset. Bamfo and Kraa (2019) gave SMEs’ performance
measures of financial and non-financial dimensions of
measuring performance. Financial dimensions include
market share, level of debtors and return on asset (Malina &
Selto, 2004). One can therefore say that the performance of
firms is crucial in business activities. Akande (2011) posits
that when organisations evaluate their level of performance,
it will help them to know if they are progressing or not.
Concepts of compeve advantage
By creating value for consumers, as part of a business
strategy, SMEs can achieve long-term viability. Put
differently, a firm’s competitive advantage serves as a
platform for developing a long-term growth strategy and
thus relates to creating value for consumers (Jones, Kato &
Weinberg 2003). Competitive advantage refers to the ability
of an organisation to generate profits that are higher than the
industry average because of its distinct market position
(Breznik 2012). Positional superiority is achieved through
providing higher customer value or attaining lower relative
costs in the market (Gitau & Kosgei 2016). Also, a competitive
advantage is the process where a firm is able to achieve and
sustain profit that exceeds what its competitors are achieving
(Christian, 2020). An organisation is able to gain a competitive
advantage over its competitors by understanding its market
and customers (Shodunke et al. 2020). It is a situation whereby
an organisation is able to deliver the same benefits as
competitors but at a lower cost (cost advantage), delivers
benefits that exceed those of its competitors’ products
(differentiation advantage) and creates superior value for its
customers (Porter 2010). Competitive advantage is the ability
gained through attributes and resources to perform at a
higher level than others in the same industry or market
(Al-Swidi & Mahmood 2011). Wang (2014) asserts that an
organisation is able to obtain a competitive advantage by
developing or acquiring a set of attributes that will help it to
outperform its competitors. Competitive advantage allows a
form to create superior value for its customers and profits
for itself.
Aziz and Samad (2016) in their study to examine the effect
of competitive advantage on food manufacturing SMEs in
Malaysia revealed that competitive advantage had a strong
positive impact on SMEs. The study also found a mediating
effect of competitor orientation and proactiveness on the
competitive advantage relationship of SMEs. Yogyakarta
(2018) carried out a study on competitive advantage with
key success of Batik SMEs marketing performance in
Indonesia. The study found that competitive advantage has
significant effect on marketing performance. Furthermore,
Majeed (2011) in his study on impact of competitive
advantage on organisational performance in Pakistan found
that competitive advantages significantly have association
with SME performance. The study sees competitive
advantage and SME performance as two special terms with
an actually complex association. Also, Secluk (2016) in his
study on factors affecting firm competitiveness, evidence
from an emerging market, found positive significant effect
of proactiveness and competitor orientation on firm
competitiveness indicated by profitability and return on
assets. Najib (2013) carried out a study on the internal
sources of competitive advantage in small and medium
Indonesian food processing companies. In the study, he
examined the potential of competitor orientation and
proactiveness as sources of competitive advantage in food
processing SMEs. Competitive advantage in the study was
represented by business performance. Business performance
was operationalised as a composite variable of three
measures: sales volume, profitability and market share.
The findings indicate that competitor orientation and
proactiveness had positive effects on competitive advantage
of SMEs. The study concluded that competitor orientation
and proactiveness was one of the most important factors
that can be used to enhance competitive advantage of an
organisation.
Concepts of competor orientaon
Recently, SMEs have faced enormous pressures stemming
from the competitive nature of the economic landscape,

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which necessitated the adoption of strategic options vital to
success (Anning-Dorson 2021). One such strategic option is
competitor orientation because of its importance in
determining the scope of competitive advantage of competing
SMEs (Narver & Slater 1990; O’Dwyer & Gilmore 2019).
Competitor orientation has been defined as a firm orientation
towards the understanding of the short-term strengths and
weaknesses and long-term capabilities and strategies of both
the key current and the key potential competitors (Narver &
Slater 1990), which have been used widely in the
marketing literature (Newman, Prajogo & Atherton 2016).
Also, according to Yulianthini et al. (2021), competitor
orientation means that the company understands the short-
term strengths, weaknesses, long-term capabilities and
strategies of its potential competitors. This type of company
has a strategy and knows how to respond to its competitors’
activities. It also understands how top management responds
to competitors’ strategies (Blankson et al., 2013). It is
important to keep an eye on your competitors’ technology
capabilities to see if they are able to meet the needs of the
same target buyer as you are. Competitor orientation focuses
on three statements: How do we know who our competition
is? What kinds of technology do they have? Do buyers see
them as a viable alternative to the current offerings?
Indeed, SMEs adopt a competitor-orientation perspective to
simplify the competitive environment of business firms
(O’Dwyer & Gilmore 2019). In this context, Al-Hakimi et al.
(2023) argue how competitor orientation of competing firms can
assist a firm to achieve a competitive advantage, whereas failure
to recognise rivals leads to SMEs being insensible of the range
and influence of the networks, competencies and experiential
learning of competing SMEs, which could negatively affect
their performance. Competitor orientation allows SMEs to
compare information on essential abilities and resources in their
competitive scenario, which facilitates competitive positioning
as per marketing differentiation, complex innovation, product
and/or service scope, market scope, quality, production
capacity, leadership, cost control, competitive pricing and
differentiated advantages (O’Dwyer & Gilmore 2019).
Previous research has shown the important relation of
competitor orientation to SME performance (Gruber-Muecke &
Hofer 2015; O’Dwyer & Ledwith 2010; Vaitoonkiat &
Charoensukmongkol 2020). The drawn findings from these
studies have indicated that competitor orientation is critical
for enabling firms to monitor the competitors to increase
knowledge of their plans and strategies (Hilman & Kaliappen
2014), gaining competitive advantage and providing value
for customers (Danso, Poku & Agyapong 2017). This is
further evidenced by the fact that competitor orientation
enables firms to deal with changes in competitor strategies in
a well-informed way (Lengler, Sousa & Marques 2013).
However, the existing evidence is far from conclusive with a
number of studies reporting negative or non-significant
results (Hassen & Singh 2020; Ho et al. 2018). The inconsistent
previous findings call for additional research into contingency
factors that may explain under what conditions competitor
orientation influences SME performance. In other words, it is
important to understand whether the relationship between
competitor orientation and SME performance depends upon
particular contingencies.
Relaonship between competor orientaon
and small- and medium-sized enterprises’
performance
Competitor orientation as an aspect of market orientation is
very significantly important in aiding organisations to have a
clear information and understanding of the market place to
develop suitable and proper products and service strategies
to meet customers’ needs and requirements (Bamfo & Kraa
2019). A competitive organisation guarantees a customer-
focused strategy for market information and knowledge
base generation which are monitored by coordinated,
interfunctional marketing efforts to achieve long-term firm
success. A number of researchers have reported positive
relationship between competitor orientation and SME
performance. Julian et al. (2014) believed that competitor
orientation represents a major marketing strategy that can be
adopted by business organisation to improve its performance.
The contradictory results reported by previous studies
suggest that the relationship between competitor orientation
and performance may be more complex and the impact
cannot be viewed in a simple manner (Chaudhary et al., 2023).
For businesses to be competitive, it is required of them to
know the weaknesses and strengths as well as capabilities
and activities of competitors. Information that is gathered
about competitors helps the firm to reposition its offering so
as to prepare for the future survival of the entity (Bamfo &
Kraa 2019). Competitor orientation as part of market
orientation is seen as an organisational strategy to improve
on the products they deliver to customers. When there exists
a coordinated maximisation of the firm’s resources that aims
at performing better in the eyes of the customer, it is seen as
the organisation practicing interfunctional orientation.
The positive impact competitor orientation has on SME
performance has been supported by many researchers.
Narver and Slater (1990) established a positive relationship
between competitor orientation and business performance
for that matter profitability where a competitive organisation
is predominantly concerned with learning from various
forms of contact with competitors in the market (Slater &
Narver 2000).
Concepts of proacveness
When a company is proactive, it strives to gain an advantage
over its competitors by introducing new products and
processes to the market before its competitors do (Lyon,
Lumpkin & Dess 2000). Thus, proactiveness refers to an
opportunity-seeking and forward-thinking approach to
business development, characterised by the introduction
of new products or services before that of competitors,
in anticipation of a predicted future customer demand

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(Rauch et al. 2009). The ability to shape the business
environment and respond to competitive problems via
initiative including the use of existing advantages also falls
under the category of proactiveness (Zhang, Law & Wang
2021). Furthermore, proactiveness is when a firm has the
ability to think ahead, foresee, initiate a change or take a first-
mover leap rather than being reactionary or defensive in its
strategic posture. Proactiveness refers to an ongoing
perspective where a firm actively seeks to anticipate and take
advantage of opportunities to develop and introduce new
products and implement changes to existing firm’s strategies
and tactics (Al-Mamary & Alshallaqi, 2022). It also involves
the ability to detect future market trends while securing first-
mover advantage in the short term and shaping the direction
of the market environment in the long term (Hughes &
Morgan 2007). A strong proactive behaviour gives SMEs the
ability to anticipate needs in the market place and the capability
to anticipate competitor’s needs (Eggers et al. 2013).
Proactiveness is active to influence and lead to the future
rather than waiting to be influenced by the future. It involves
exploiting opportunities and accepting the responsibility of
failure (Kuratko, Hornsby & Goldsby 2007). Strategic
managers who manage proactively have their eyes on the
future and look for opportunities to exploit for growth and
improved performance and to create a competitive advantage
(Onyenma & Hamilton 2020). Proactiveness helps to create
competitive advantages by placing competitors in the
position of having to respond to first-mover initiatives.
Chang et al. (2007) postulate that a proactive firm does things
ahead of their rivals rather than after. They lead in the
development of new technologies, products and services as
well as capacity building to enhance growth (Jalali et al.,
2014). Keh, Nguyen and Hwei (2007) argue that proactive
orientation enables firms to be innovative and utilises internal
sharing of knowledge and information to exploit competitors’
novelty. Proactiveness is done through new market and
product development, where challenges face many firms in
today’s business environment (Onyenma & Hamilton 2020).
Relaonship between proacveness and small-
and medium-sized enterprises’ performance
In a study to determine the relationship between proactiveness
and performance of small and medium agro-processing
enterprises in Kenya, Wambogu et al. (2015) collected data by
means of a self-administered, semi-structured questionnaire
completed by owner and/or managers of agro-processing
SMEs. Data analysis was conducted in two phases:
measurement of outer model estimation and structural, inner
model estimation. Based on their findings, they concluded
that proactiveness is a major predictor of SME performance of
agro-processing SMEs in Kenya in terms of employee growth
and profitability. These findings extend empirical studies by
showing that proactiveness has positive effects on SME
performance.
Furthermore, Ibrahim and Abu (2020) examined the effects
of proactiveness, competitive aggressiveness, autonomy,
innovation and risk-taking on the performance of Abuja-based
enterprises in Nigeria through entrepreneurial orientation. As
the findings were only partially explanatory, it was suggested
that comparable investigations be repeated in order to verify
these findings. Furthermore, Atikur et al. (2021) investigated
risk-taking, innovativeness and proactiveness of SMEs in
Dhaka, Bangladesh. Rendering responses from 180 SME
owners, the study found that factors such as the age of the
business as well as risk-taking, innovativeness and proactiveness
had a significant influence on the performance of SMEs.
Theorecal framework
This study is anchored on knowledge-based view (KBV)
theory which was propounded by Grant (1996) as the
extension of resource-based view (RBV). The theory is
important for this study because the possession of knowledge-
based resources, known as intellectual capital, is essential in
business environment. These resources contribute to lower
costs, foster innovation and creativity, improve efficiencies
and deliver customer benefits. Knowledge-based view
focuses on knowledge as the most strategically important
resource of a firm (Hughes et al. 2022). Kirsimarja and Aino
(2015) argue that organisations perform differently as a result
of the differences in their stock of knowledge and capabilities
through utilising and developing knowledge. The authors
further informed that organisations exist to create, transfer
and transform knowledge into a competitive advantage.
Knowledge is related to humans; individuals are intentional
and intelligent agents and especially important elements
within complex situations and structures that cannot be
understood by any single individual.
The knowledge based view (KBV) suggests that SMEs with a
strong knowledge base derived from competitor orientation
and proactiveness are more likely to achieve a competitive
advantage. The knowledge base process helps in building a
comprehensive knowledge base that SMEs can use to make
informed decisions and develop effective strategies. Also, the
utilisation of knowledge acquired and shared by SMEs
involves translating the knowledge into action by developing
innovative products or services, improving operational
processes or identifying new market opportunities. Therefore,
the ability to effectively utilise knowledge is critical for gaining
a competitive advantage. Furthermore, the knowledge base
developed through competitor orientation and proactiveness
provides SMEs with a foundation for achieving a competitive
advantage. Thus, by leveraging their knowledge, SMEs can
differentiate themselves from competitors, create unique value
propositions and develop sustainable market positions.
The independent variables in this study, namely, proactiveness
and competitor orientation, are often the basis used to gather
information that is useful for the organisation. For competitor
orientation, knowledge is generated from customers, while for
proactiveness, the resources of the organisation are utilised to
gather new knowledge, which can be transferred to other
organisations. KBV suggests that crucial knowledge can
enable organisations to enjoy high performance (Grant 1996),

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while knowledge resources (competitor orientation and
proactiveness) will lead to organisations being competitive.
Competitiveness, in turn, will lead to organisations enjoying a
sustained edge, which can be termed as high performance
(Pöyhönen & Blomqvist 2006). Pöyhönen and Blomqvist (2006)
assert that knowledge will lead to competitive advantage,
which ultimately will lead to performance. Competitive
advantage can thus act as a link between competitor orientation
and SME performance on the one hand and between
proactiveness and performance on the other. In tandem with
KBV, both competitor orientation and proactiveness are
suggested knowledge resources, as they can be utilised to
generate information crucial to competitiveness.
Therefore, SMEs that actively acquire, share and utilise
knowledge about their competitors and the market are more
likely to achieve a competitive advantage. Competitor
orientation and proactiveness play a key role in developing a
strong knowledge base, which can drive SME performance
and success in a competitive environment.
Framework of the study
The framework presented in Figure 1 shows the hypothesised
relationship for the present study between the independent
variables (competitor orientation and proactiveness) and the
dependent variable (SME performance) with the predictor
variable (competitive advantage).
The framework is based on the literature overview and the
oretical framework that links the independent variables
to the predictor variable and the dependent variable. From
this, the following hypotheses were formulated:
H1: Competitor orientation has a significant effect on SMEs’
performance.
H2: Proactiveness has a significant effect on SMEs’ performance.
H3: Competitive advantage has a significant effect on SMEs’
performance.
H4: Competitive advantage significantly influences the
relationship between competitor orientation and SMEs’
performance.
H5: Competitive advantage significantly influences the
relationship between proactiveness and SMEs’
performance.
Research methodology
The present study focused on three important subsectors
of SMEs, namely, manufacturing, service and information
technology. Self-administered questionnaires were used to
collect data in the 20 local government areas in Lagos State.
This study is descriptive that tests the role of competitor
orientation and proactiveness in competitive advantage for
SMEs’ performance.
Research design
The study utilised a cross-sectional survey design, which was
quantitative in nature. This was considered a suitable method
to generate relevant information on the current situation
(Williams, Onsman & Brown 2010).
Research approach
The study utilised a deductive research approach. The
deductive approach is deemed most appropriate because the
study tests the theory that competitor orientation and
proactiveness increase organisational performance.
Populaon and sample of the study
The study population was not known when the study
commenced; hence, 100 copies of questionnaires were
distributed among owners and managers of SMEs in Lagos
State, Nigeria, the chosen domain of the study. Stratified and
simple random sampling procedures were used to distribute
copies of the questionnaire to the local government districts,
involving a cross section of enterprises in the three subsectors
mentioned earlier, namely, manufacturing, service and
information technology. Thus, the study’s research strategy
adopted the seven Likert-scale structured questionnaires to
collect data from SME owners and managers in the three
subsectors.
Data collecon procedures and instrument
Data were generated utilising self-administered questionnaires.
The questionnaire content was adapted from the literature,
with four questions on competitor orientation derived from
Narver and Slater (1990), three questions on proactiveness
assembled from the work of Hughes and Morgan (2007), four
items on competitive advantage adapted from Sigalas,
Economou and Georgopoulos (2013), and eight questions on
SME performance derived from the work of Spillan and Parnell
(2006). The items used in this study explain the KBV as they
focus attention on resources which can be defined as those
assets that are tied semi-permanently to the firm. Unique assets
are difficult for competitors to replicate and thus serve to
differentiate their possessors. The present study does not
suggest that competitor orientation, proactiveness, competitive
advantage and SME performance independently constitute
Source: Ogundare, J.A., 2023, ‘Invesgang the mediang role of compeve advantage on
the market, and entrepreneurial orientaon, of SMEs in Lagos State, Nigeria’, Unpublished
PhD Thesis, North-West University Business School, Potchfestroom Campus, South Africa
SME, small- and medium-sized enterprises.
FIGURE 1: Conceptual framework of the relaonship between competor
orientaon, proacveness and compeve advantage in small- and medium-sized
enterprises’ performance.
Independent variable Dependent variable
Predictor variable
Competitor orientation
Proactiveness
SME performance
Competitive
advantage

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unique resources, but rather that they can collectively contribute
to the creation of unique resources. While each of these four
elements is necessary, individually they are not sufficient for
creating positional advantage. However, past research suggests
that each element is adequate to offer strengths, and together
they can help a firm be uniquely competitive.
Data analysis
The present study used partial least square structural
equation modelling (PLS-SEM) on SmartPLS2 to analyse the
data and followed the two-stage strategy for analysing the
measurement model and the structural model separately
(Urbach & Ahlemann 2010). The following main criteria and
techniques were employed to estimate the outer and inner
models. The first stage considered unidimensionality,
reliability, convergent validity and discriminant validity,
while the second stage assessed the goodness-of-fit and
study hypothesis framework (Lee & Chen, 2013). The criteria
to analyse the outer model were coefficient of determination
(R-square, R2), path coefficient and effect magnitude ( f 2).
Ethical consideraons
All participating respondents gave their consent to complete
the questionnaire. All respondents were properly informed as
to the completion of the questionnaire being completely
voluntary, while any and all information supplied by
respondents alongside the identity of each respondent were
treated as strictly confidential. Ethical clearance to conduct this
study was obtained from the North-West University Business
School, Faculty of Economics and Management Sciences
Research Ethics Committee (Ref no. NWU-00597-23-A4).
Results
To evaluate the reliability and validity of the instruments
utilised for data collection, the measurement model was
developed using PLS-SEM path modelling. Table 1 illustrates
the reliability and the validity of the latent variables of the
study.
Table 1 demonstrates the reliability and validity of constructs
of the study. Construct reliability and convergent validity of
components were assessed using composite reliability and
average variance extracted (AVE), as indicated by Garson
(2016). Composite reliability coefficient should be ≥ 0.7,
whereas AVE coefficient should be ≥ 0.5 (Garson 2016). Item
loadings should be above 0.5. Table 1 shows that all of the
items satisfied the minimum bench mark for item loadings
(i.e. 0.5), composite dependability (i.e. 0.7) and AVE (i.e. 0.5),
thus demonstrating reliability and convergent validity. The
data were subsequently subjected to discriminant validity
test using Fornell-Larcker criterion. The outcome is presented
in Table 2.
Average variance extracted was employed by the study to
establish discriminant validity using the Fornell-Larcker
criterion. For discriminant validity to exist, the square root of
the AVE should be higher than its correlation with other
latent variables (Garson 2016). In Table 2, the bolded figures
represent the square root of the AVE of each latent component.
The square roots of the AVE of each construct are higher than
their correlations with other latent constructs. Based on the
Fornell-Larcker criterion, the data indicated discriminant
validity. Subsequently, the study hypotheses were examined
by generating the structural model. The results are shown in
Table 3.
It is evident from Table 3 that competitor orientation (CO) is
significantly related to SMEs’ performance at less than 5%
(β = 0.27, p < 0.05). H1, which indicates that competition
orientation has a considerable effect on SMEs’ performance in
Nigeria, is therefore empirically supported. Similarly,
proactiveness (PRO) has a positive and significant relationship
with the performance of SMEs in Nigeria at less than 1%
significant level (β = 0.42, p < 0.01). Evidently, H2, which
indicates that proactiveness has a considerable effect on
SMEs’ performance in Nigeria, is also empirically supported.
Finally, and in a similar fashion, competitive advantage
(CMA) does have a positive and significant relationship with
TABLE 3: Direct path coecient.
Relaonship Beta coecient SE T stascs PDecision
CO -> SME 0.27 0.11 2.509 0.01 Supported
PRO -> SME 0.42 0.12 3.441 0.00 Supported
CMA -> SME 0.39 0.13 2.955 0.00 Supported
CO, competor orientaon; PRO, proacveness; CMA, compeve advantage; SME, small-
and medium-sized enterprises; SE, standard error.
TABLE 2: Discriminant validity using Fornell-Larcker criterion.
Construct 1 2 3 4
1. Competor orientaon 0.84 - - -
2. Competor advantage 0.55 0.83 - -
3. SMEs’ performance 0.62 0.54 0.83 -
4. Proacveness 0.63 0.56 0.68 0.90
Note: The bolded numbers represent the square root of the AVE of each latent construct.
AVE, average variance extracted.
TABLE 1: Construct reliability and validity (measurement model).
Construct Items Loadings AVE CR
Competor orientaon CO1 0.80 0.70 0.90
CO2 0.89 - -
CO3 0.78 - -
CO4 0.86 - -
Proacveness PRO1 0.88 0.57 0.92
PRO2 0.90 - -
PRO3 0.91 - -
Compeve advantage CMA1 0.80 0.70 0.91
CMA2 0.86 - -
CMA3 0.88 - -
CMA4 0.79 - -
SME performance SME1 0.78 0.70 0.93
SME2 0.81 - -
SME3 0.85 - -
SME4 0.86 - -
SME5 0.87 - -
SME6 0.82 - -
Note: Some items were deleted due to their insucient loadings.
AVE, average variance extracted; CR, construct reliability; CO, competor orientaon; PRO,
proacveness; CMA, compeve advantage; SME, small- and medium-sized enterprises.

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the performance of SMEs in Nigeria at less than 1% significant
level (β = 0.39, p < 0.01). Therefore, H3, which claims that
competitive advantage has a considerable effect on SMEs’
performance in Nigeria, is supported empirically. Next, the
study examined the mediating influence of competitive
advantage in the relationship between competitor orientation,
proactiveness and SMEs’ performance. The outcome of the
data analysis is provided in Table 4.
Table 4 presents the results of the analysis of the mediating
influence of competitive advantage on the relationship
between competitor orientation, proactiveness and SMEs’
performance. From Table 4, it can be determined that CMA
positively and significantly mediates the relationship
between competitor orientation (CO) and SMEs’ performance
(SME) (β = 0.27, p < 0.01) at less than 1% significant level. This
suggests an indirect relationship between competitor
orientation and SMEs’ performance that is accounted for by
competitive advantage. Thus, H4, which claims that there is
a substantial association between competitive advantage and
competitor orientation and SMEs performance in Nigeria, is
supported empirically.
Table 4 further shows that CMA positively and significantly
mediates the relationship between proactiveness (PRO) and
SMEs’ performance (SME) (β = 0.19, p < 0.05) at less than 5%
significant level; hence, it can be claimed that proactiveness
in the case of SMEs positively and significantly leads to
competitive advantage, while competitive advantage
positively and significantly leads to improved SMEs’
performance. Therefore, this study empirically validates
H5, which argues that there is a substantial relationship
between competitive advantage, proactiveness and SMEs’
performance in Nigeria.
Table 5 illuminates the variance in performance of SMEs in
Nigeria resulting from competitor orientation, proactiveness
and competitive advantage.
Together, competitor orientation, proactiveness and
competitive advantage account for 52% variance in the
performance of SMEs in Nigeria, while competitor orientation
and proactiveness account for 36% variance in the competitive
advantage of SMEs in Nigeria.
The effect size of each path in the whole structural equation
model was investigated using f 2. The results are presented in
Table 6.
According to Cohen (1988), f2 values of 0.02, 0.15 and 0.35
represent small, medium and large impacts, respectively.
When the effect size of the exogenous variables on the
endogenous variable of this study was tested, the results
showed that the effect size of competitor orientation on SMEs’
performance was 0.09, suggesting that it has a small effect
size on SMEs’ performance. On the other hand, proactiveness
had a f
2 value of 0.20, indicating that proactiveness has a
medium effect on SMEs’ performance. Finally, and similarly
to proactiveness, competitive advantage had a f2 value of 0.19,
demonstrating that competitive advantage has a medium
effect size on SMEs’ performance in Nigeria.
Finally, Table 7 is utilised to show the summary of the test of
hypotheses of the study.
From the results presented in Table 7, it is apparent that
competitor orientation has a positive and substantial effect on
the performance of SMEs in Nigeria (β = 0.27, p < 0.05); hence,
an increase in competitor orientation will lead to a
corresponding increase in the performance of SMEs in this
country. Similarly, it can be derived from Table 7 that
proactiveness is a positive and significant predictor on the
performance of SMEs in Nigeria (β = 0.42, p < 0.01). Thus, a rise
in proactiveness attitude will lead to a comparable increase in
the performance of SMEs in the country. Moreover, competitive
advantage is positively and significantly associated with the
performance of SMEs in Nigeria (β = 0.39, p < 0.01).
Consequently, growth in competitive advantage will lead to
an increase in the performance of SMEs. It is also evident
from Table 7 that competitive advantage has a mediating
effect on the relationship between competitor orientation and
SMEs’ performance (β = 0.27, p < 0.01). Finally, it is evident
from Table 7 that competitive advantage significantly mediates
the relationship between proactiveness and SMEs’ performance
(β = 0.19, p < 0.05). Therefore, it may be claimed that
proactiveness by a firm leads to higher competitive advantage
and ultimately stronger SMEs’ performance.
Discussion of results
The findings and discussion of this study were carried out
based on the hypotheses supporting the study. Thus, the
result of the study reveals the importance of competitive
TABLE 7: Summary of the test of hypotheses.
Hypotheses Relaonship Beta T stascs Decision
H1CO -> SME 0.27 2.509 Supported
H2PRO -> SME 0.42 3.441 Supported
H3CMA -> SME 0.39 2.995 Supported
H4CO -> CMA -> SME 0.27 2.936 Supported
H5PRO -> CMA -> SME 0.19 2.132 Supported
CO, competor orientaon; PRO, proacveness; CMA, compeve advantage; SME, small-
and medium-sized enterprises.
TABLE 6: Eect size of exogenous variables.
Construct f2Firm performance
Competor orientaon 0.09 Small
Proacveness 0.20 Medium
Compeve advantage 0.19 Medium
NA, not applicable.
TABLE 5: R-square.
Construct R-squared
SME performance 0.52
Compeve advantage 0.36
SME, small- and medium-sized enterprises.
TABLE 4: Indirect path coecient.
Relaonship Beta SE T stascs PDecision
CO -> CMA -> SME 0.27 0.09 2.936 0.00 Supported
PRO -> CMA -> SME 0.19 0.09 2.132 0.03 Supported
CO, competor orientaon; PRO, proacveness; CMA, compeve advantage; SME, small-
and medium-sized enterprises; SE, standard error.

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advantage to SMEs and how competitor and proactiveness
help SMEs owners and/or managers to have a competitive
edge over their rivals (Racela 2014).
Competitor orientation was found to have a significant impact
on the performance of SMEs. When an organisation monitors
its competitors to increase knowledge of their plans and
strategies, gaining competitive advantage and providing
value for its customers, that organisation is said to be
performing efficiently (O’Dwyer & Gilmore 2019; Yulianthini
et al. 2021). Thus, by staying informed and responsive to the
competitive landscape, SMEs can change their strategies and
increase their chances of achieving sustainable growth and
success in a well-informed way. Therefore, based on the
findings of this study, hypothesis HO1 of the study is achieved,
which states that competitor orientation has a significant
effect on the performance of SMEs. The study supports the
findings of Danso et al. (2017), Hilman and Kaliappen (2014)
and Vaitoonkiat and Charoensukmongkol (2020).
Proactiveness has a significant impact on the performance of
SMEs as revealed by the study findings. Proactiveness plays
a crucial role in determining the performance of SMEs by
seizing opportunities, gaining a first-mover advantage,
adapting to change, fostering innovation, mitigating risks,
enhancing customer focus, gaining a competitive edge,
optimising resource allocation, building resilience and
improving SME reputation (Onyenma & Hamilton 2020;
Zhang, Law & Wang 2021). Thus, a proactive approach is
vital for SMEs to achieve sustained growth, success and long-
term profitability in a dynamic and competitive business
landscape. Therefore, based on the findings of this study,
hypothesis HO2 of the study is thereby achieved, which states
that proactiveness has a significant effect on SMEs’
performance. The present study supports the findings of
Atikur et al. (2021) and Wambogu et al. (2015).
Furthermore, the study showed that competitive advantage
does affect the performance of SMEs (Al-Swidi & Mahmood
2011). Competitive advantage significantly affects SMEs’
performance by driving differentiation, market share
expansion, improved pricing power, cost efficiency,
sustainability, innovation and attractiveness to investors
(Shodunke et al. 2020). Small- and medium-sized enterprises
that can identify, nurture and leverage their competitive
advantages are more likely to achieve long-term success and
outperform their competitors. Thus, based on the findings of
the study, hypothesis HO3 of the study is therefore achieved
which states that competitive advantage has a significant effect
on SMEs’ performance. The study supports the findings of
Aziz and Samad (2016), Majeed (2011) and Yogyakarta (2018).
Finally, the study also showed that competitive advantage
mediates the relationship between competitor orientation,
proactiveness and performance of SMEs (Gitau & Kosgei
2016; Shodunke et al. 2020). Thus, creating value for
consumers as part of a business strategy can make SMEs
achieve long-term viability, growth, and sustain profit that
exceeds what the competitors are achieving (Wang 2014).
Therefore, based on the findings of the study, hypotheses
HO4 and HO5 of the study are achieved, which state
that competitive advantage significantly influences the
relationship between competitor orientation, proactiveness
and performance of SMEs. The study supports the findings
of Aziz and Samad (2016), Najib (2013) and Secluk (2016).
Limitaons
The article only focuses on the SME sector as a starting source
within a particular context. A dynamic survey to examine the
relationship between competitive advantage and competitor
orientation, proactiveness and SMEs’ performance in other
sectors such as large enterprise and insurance, among others,
could assist to further substantiate the conclusions from the
present study.
Recommendaon
The study therefore reveals that SME owners and/or
managers have to take competitor orientation and
proactiveness more seriously as it may enhance their
performance in attaining a competitive edge over their
rivals. The study makes a practical contribution by linking
the independent variables, the dependent variable and the
predictor variable in a single model, therefore adding to the
body of knowledge. Furthermore, it explains how KBV
illustrates the linkage between competitive advantage,
competitor orientation and proactiveness, which ultimately
leads to firm performance.
Conclusion
Previous research primarily neglected the competitive
advantage phenomenon and failed to explore the
direct relationship between competitor orientation and
proactiveness (the independent variables in the present
study) and SMEs’ performance (the dependent variable in
this study). This is despite the fact that competitive advantage
is considered a mediating variable in the relationship
between competitor orientation, proactiveness and SMEs’
performance. Based on empirical evidence within a Nigerian
context, the study indicated that competitive advantage
mediates the connection between competitor orientation,
proactiveness and SMEs’ performance.
Acknowledgements
The authors acknowledge all anonymous reviewers for
remarks that considerably enhanced the manuscript. Also,
the authors acknowledge the Small and Medium Enterprises
Development Agency of Nigeria (SMEDAN).
Compeng interests
The authors have declared that no competing interest exists.
Authors’ contribuons
J.A.O. is the principal author of this article. The author carried
out the conceptualisations of the variables as well as the

Page 10 of 11 Original Research
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methodology and the original draft preparation of the study.
Also, the analysis of the study was carried out by the author.
S.v.d.M. is the supervisor/co-author of the study and
provided conceptual input and guidance in the structuring
and writing of the manuscript.
Funding informaon
This research received no specific grant from any funding
agency in the public, commercial or not-for-profit sectors.
Data availability
The authors affirm that the data supporting the findings of
this study are available within the study.
Disclaimer
The views and opinions expressed in this article are those of
the authors and do not necessarily reflect the official policy or
position of any affiliated agency of the authors.
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