Conceptual Framework of Factors Affecting SME Development: Mediating Factors on the Relationship of Entrepreneur Traits and SME Performance

Only a small fraction of SMEs are successful in achieving exceptional performance and sustainable growth, The literature shows that there is still a gap for effective ways to increase the size of that fraction. This paper aims to contribute in filling the gap by identifying factors affecting SME performance and, hence, their development; and to develop a conceptual framework explaining their relationships. The literature reveals that although there is positive relationship between entrepreneur traits and firm performance in the context of SMEs, the relationship is still inconclusive; suggesting that there are intervening constructs between the two constructs. Field observations and literature reviews suggest five second- order constructs serving mediating roles between entrepreneur traits and firm performance that may clarify the relationship, i.e., (1) innovative performance, (2) innovative capacity, (3) organizational search, (4) market orientation, and (5) entrepreneurial orientation. Although the relationships among the seven constructs have been extensively studied in the extant literature, this paper is one of the few efforts, if any, in investigating the seven constructs in a comprehensive framework as a basis for further studies. If empirically supported, the proposed framework may provide an effective alternative in assisting entrepreneurs and SMEs’ owners to develop their firms more effectively.