Causation processes and innovation strategy in small- and medium-sized firms in emerging countries: The moderating role of founder-CEOs' human capital

Abstract

In the dynamic and resource-constrained environment of emerging countries, small- and medium-sized enterprises (SMEs) face unique challenges in pursuing innovation strategy. This study addresses a critical gap in understanding how founder-CEOs' causation processes interact with human capital to shape SMEs' innovation strategy. While previous research has separately explored the impact of causation processes on innovation and the influence of founder-CEOs' managerial experience, these streams remain disconnected. Drawing on human capital theory, we investigate how adopting causation processes affects innovation strategy in emerging country SMEs, focusing on the moderating role of founder-CEOs' human capital. Our primary analysis utilises two waves of multi-informant survey data from 103 Indian SMEs. Results reveal that founder-CEOs' specific human capital moderates the relationship between causation processes and innovation strategy. This moderating effect strengthens with rich marketing experience but weakens with extensive technological experience. We supplement our findings with qualitative insights from interviews with 14 Indian and 19 Chinese SME founder-CEOs. This additional analysis provides further context and validates the applicability of our results. Our research contributes to a nuanced understanding of SME innovation dynamics in emerging countries and offers valuable implications for both theory and practice in fostering innovation-driven growth in this vital economic context.