Developing compositional capability in emerging-market SMEs

Abstract Developing compositional capability is critical for small-and-medium enterprises to compete in emerging markets. We advance a strategy tripod model embedding compositional capability in three conditions that promote the compositional blend of imitation and innovation. In a sample of 163 SMEs from China, we find that industry-level competitive intensity and intermediate market openness, firm-level cooperation orientation and upgrading orientation, and institution-level government support and weak IPR protection positively influence the development of compositional capability which stimulates firm performance with respect to both objective and subjective performance indicators. These findings have strong implications for the composition-based view and the growth of SMEs.