Research

Impact of Innovation Capabilities on FIIB Business Review

11(1) 67–78, 2022
2021 Fortune Institute of
Business Sustainability in Small and International Business
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DOI: 10.1177/23197145211042232
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Jalal Rajeh Hanaysha1 , Mohammed Emad Al-Shaikh2,

Shanmugan Joghee1 and Haitham M. Alzoubi1

Abstract
The rationale of this study was to investigate the effect of innovation types on business sustainability in the small and medium
enterprises (SMEs). Quantitative approach was used for collecting the data and fulfilling the stated objective. Specifically, the data was
collected from 171 employees in SMEs in the Kingdom of Saudi Arabia. The analysis for the collected data was conducted using the
partial least square approach (PLS-SEM). The findings showed that product innovation as well as service innovation have significant
positive impacts on business sustainability. The results further confirmed that process innovation is vital for achieving business
sustainability. Finally, the outcomes verified that marketing innovation has a significant impact on business sustainability. The results
confirmed the significance of innovation capabilities in helping entrepreneurs in SMEs to sustain their businesses and improve their
competitive strengths.

Keywords
Business sustainability, innovation, small and medium enterprises

Introduction them. Previous literature also documented that innovation

The concern towards environmental protection and
following sustainable business practices have become
vital for businesses in order to satisfy market needs
and stakeholder’s expectations (Adams et al., 2006).
Governments have increased their concerns towards
protecting the environment and fulfilling social needs as
well as economic objectives. Accordingly, several firms
have largely focused on improving their innovation
capabilities in order to build their competitive strengths
and improve the sustainability of their businesses.
Innovation was described in the literature as the ability of a
firm to introduce new or improved products, processes,
services and marketing approaches to meet market needs
(Lawson & Samson, 2001). Past literature indicated that
innovation is vital for strengthening brand power and
achieving success in the presence of emerging competition
(Betaraya et al., 2018; Yam et al., 2004). According
to Hanaysha and Hilman (2015), firms have recently
experienced momentous challenges with regards to the
sustainability practices of their businesses; and for this
reason, innovation represents the main strategy to overcome
enables firms to ensure their survival and improve their
performance on the long term (Ancona & Caldwell, 1987).
The growing complexity of different products and
services, fluctuating demands in markets and shorter
product life cycles urges entrepreneurs to develop new or
improved capabilities and be innovative in order to secure
sustainable competitive advantages. The marketing
literature highlighted that firms which emphasize on the
introduction of innovative products and services and
promote them through digital marketing technologies
can achieve distinctive advantages. Moreover, successful
entrepreneurs tend to exploit business opportunities and
improve their capabilities continuously in an attempt to
reinforce the competitiveness and performance of their
businesses (Afzali & Ahmed, 2016; Sternberg & Arndt,
2001). According to certain scholars (Expósito & Sanchis-
Llopis, 2019; Martos-Partal, 2012), product innovation
enables firms to respond to changing market needs and
develop brand image. Gunday et al. (2011) demonstrated
that firms can develop their innovation capabilities in
diverse aspects, for instance products, process, structures

1 School of Business, Skyline University College, Sharjah, United Arab Emirates.

2 College of Business Administration, Imam Abdulrahman Bin Faisal University, Dammam, Saudi Arabia.

Corresponding author:
Jalal Rajeh Hanaysha, School of Business, Skyline University College, 1797, Sharjah, United Arab Emirates.
E-mail: jalal.hanayshi@yahoo.com
68
and services. When a firm proves its ability to innovate and
come up with new products or services and please market
targets, it tends to obtain greater profitability and nurture
its businesses competencies (Damanpour, 1991).
Earlier researches stressed on the significance of various
innovation types in driving business sustainability and
competitiveness. Fernández et al. (2018) stated that firms
which have innovative processes concentrate on activities
and products that ensure greater energy efficiency and
minimal resource consumption; thus, more appreciated
within the environment. Moreover, they found that firms
which focus on innovation for minimizing environmental
effects tend to innovate for the purpose of increasing
energy efficiency. Although innovation capabilities have
been regarded as key determinants of business performance
and success, only limited empirical researches tested
their linkages with business sustainability, particularly
in SMEs context. Rauter et al. (2019) indicated that only
few studies examined the linkages between innovation
capabilities and corporate sustainability. The authors added
that the evaluation of innovation performance should
address environmental and social aspects of business
activities. Additionally, the available empirical research on
innovation capabilities has focused mainly on product,
process and service innovation. Thus, this article aims to
contribute to the literature by incorporating marketing
innovation to measure and test its effect on business
sustainability in the SMEs context. The next sections
present the literature review, methodology, results, and
then the discussion and conclusion.
Literature Review
Business Sustainability
Sustainable development exists when a firm implements
proactive approaches to meet the objectives and wishes
of its stakeholders and at the same time considers the
future generation’s needs (Bansal & DesJardine, 2014).
The concept of sustainability was defined previously as
the ability to fulfil economic and social needs without
harming the ecological environment (Drexhage &
Murphy, 2010; Mullens, 2018). In other words, business
sustainability focuses on achieving three distinct goals;
economic, environmental and social performance (Rana,
2019; Sartori et al., 2014). Meng (2015) added that
sustainability concept emphasizes on meeting business
objectives and human wellbeing. The above sustainability
definitions indicate that firms should not merely
concentrate on increasing shareholders’ wealth, but they
have to consider the influence of their business operations
on employees, the society and the environment as well
(Freeman, 1984). The advantages of sustainability practices
will eventually be translated through improved earnings,
higher product quality and brand satisfaction, organizational
commitment, improved brand image, the potential for
FIIB Business Review 11(1)
government support, cost saving that results from
sustainable logistics and supply chain, and minimal
environmental liability and legislation costs.
In todays’ dynamic markets, firms have to regularly
analyse and assess their internal as well as external
environment in order to learn about the expectations of
their target audiences and then be able to utilize available
resources efficiently in an attempt to face emerging
challenges and obtain sustainable competitive advantages
(Kamboj & Rahman, 2017). Currently, firms of different
sizes have realized that consumers mainly evaluate them
based on their environmental and social performance
and for this reason, the viability of their businesses is
contingent on the ability to act upon consumers’
expectations (Hussain et al., 2018). Martínez and del
Bosque (2014) maintained that firms can enhance their
reputations and increase customer loyalty through adopting
sustainability practices. Certain studies on corporate
sustainability (Ng & Rezaee, 2015; Yusoff et al., 2019)
outlined that a firm which employs sustainable business
practices in its operations tend to have greater brand value
and enjoy lower cost of equity capital. Dyllick and Muff
(2016) added that the sustainable practices appear through
minimizing environmental emissions, ensuring the well-
being of a society and achieving economic objectives of
the business. They further stated that sustainable businesses
benefit from lower risks and costs of doing business, higher
interest among talents to join them, developed brand
reputation and better competitive advantages.
Innovation Capabilities
The Kingdom of Saudi Arabia is one the governments
which have recognized that aggregate innovation is vital
for meeting the strategic wishes and goals of the country
(Al. Othman & Sohaib, 2016). The participation of Saudi
Arabia in the World Trade Organization (WTO) clearly
indicates that it desires to be a key member in the other
world economies. Innovation exists when a firm introduces
a new product, service or process for the purpose of
satisfying the needs of its stakeholders. In the theoretical
literature, Teece et al. (1997) developed dynamic
capabilities perspective as an extension to the resource-
based view, which states that the distinctive resources and
capabilities of a firm represent the key assets for building
and sustaining its competitive advantage. They further
illustrated that dynamic capabilities help organizations
to increase their business performance outcomes and
strengthen their competitiveness (Teece, 2009). Certain
researchers (Brown & Eisenhardt, 1995; Wang & Ahmad,
2007) reported that firms can improve their business
growth through product and process innovations. Lin et al.
(2010) also regarded marketing innovation as key capability
that has positive impact on business growth and survival.
However, this article focuses on four distinct forms of
innovation (product innovation, process innovation,
Hanaysha et al.
service innovation and marketing innovation) to test their
effects on business sustainability. These innovation
capabilities have been used by Lin et al. (2010) in the same
model to measure innovation capabilities. Moreover,
Atalay et al. (2013) used product innovation, marketing
innovation and process innovation together in their study
to test their impact on firm performance.
Ideally, every economy should provide a series of
favourable institutions taking into account a robust national
innovation ecosystem to boost and encourage innovation
efforts (Tran et al., 2020). According to the institutional
theory, an institutional pressure, for example, coercive
legal obligations established by institutional environments
may have a strong impact on the creation of formal
structures of a company greater than pressures from the
market. This refers to the fact that when a company is
largely reliant on institutional environments in the presence
of high uncertainty, adopting institutionally approved
practices, organizational structures, or shared values can
safeguard its survival with a better legitimacy (Deephouse,
1996; Peters, 2011; Scott, 1987). That is, based on the
assumptions of institutional theory, institutional pressures
tend to simplify the social process through which the
company moves toward accepting a collective meaning of
social reality—a notion whose validity is perceived as
independent of the own views or actions of the company
while it is taken for granted as describing the manner in
which things are and how to accomplish them (Scott,
1987). In this regard, enterprises (particularly small
enterprises which can be influenced easily by external
pressures of institutions, for instance, government
regulations and rules) tend to conform with the induced
environmental regulations of government institutions
and exercise larger efforts to nurture their innovation and
environmental capabilities due to the amplified opportunity
for their survival and legitimacy (Joo et al., 2018).
Product innovation has largely been regarded as one
of the foremost organizational capabilities and it was
conceptualized in the literature as a firm’s ability to offer
a new or improved product that can meet the needs of
market target (Damanpour, 1991; Hanaysha, 2020).
Sharma and Lacey (2004) demonstrated that entrepreneurs
in successful SMEs regularly analyse their capabilities and
the perceptions of customers towards their products and
services, and emphasize on introducing new products from
time to time to satisfy market needs and ensure the well-
being of a society. They also compare their practices with
those of competitors and design the relevant marketing
strategies. Al. Othman and Sohaib (2016) examined
innovation capabilities and corporate sustainability in
the context of Saudi Arabia and suggested that product
innovations are the main determinants of sustainable
development. Moreover, Sipos (2008) indicated that firms
can build and sustain their competitiveness through
product innovations that are characterized by advanced
technologies and contemporary production methods. To
69
remain competitive, firms have to produce recyclable
products and use environmental friendly materials
to minimize environmental emissions. Eggert et al.
(2014) confirmed that the product innovation capability
is necessary for improving business performance and
competitive advantages. Rauter et al. (2019) also reported
positive linkages between product innovation and corporate
sustainability. Therefore, we propose the following
hypothesis.
H1: 
Product innovation has a positive effect on
business sustainability.
Services innovation is another important organizational
strategy which has received a noteworthy attention in the
previous literature (Ibrahim et al., 2018). Service innovation
was conceptualized as an organization’s ability to provided
new or upgraded services and adopt new approaches for
serving its customers in the best way to maintain them
on the long term. Sundbo and Gallouj (2000) stated that
service innovation exists when a firm is able to introduce
original or novel ideas that can enhance the service delivery
process and support customers. Firms can capitalize on
various mobile and digital technologies for serving and
reaching customers (Sofi & Hakim, 2018). The innovations
in service delivery provide customers with superior values
and improve their satisfaction (Hanaysha et al., 2021;
Kindström et al., 2010). In the prior literature, customer
service (Hanaysha, 2016) and service innovation have
been regarded as the significant capabilities for enabling
firms to increase their performance and enhance brand
reputation (Eggert et al., 2014; Hanaysha & Hilman, 2015;
Lin, 2013). In context of Saudi Arabia, service innovation
has been regarded as a key sources for achieving sustainable
development goals. The extant literature also showed
that corporate sustainability can be achieved when a firm
introduces new services regularly (Cainelli et al., 2004;
Rauter et al., 2019). In general, previous literature testified
that innovation represents a valuable strategy for enhancing
firm performance and achieving business sustainability
(Gunday et al., 2011; Rauter et al., 2019; Zott, 2003). These
views have been confirmed by Walker (2004); Expósito
and Sanchis-Llopis (2019) who reported that innovative
corporations tend to generate better market positions and
survive in the presence of competition. Hence, following is
proposed the second hypothesis:
H2: 
Service innovation has a positive effect on
business sustainability.
Furthermore, process innovation has been established as
an important strategy for achieving business objectives.
Process innovation exists when a firm is able to design and
apply a new method or technology for performing business
activities in an efficient way. Process innovation includes
the capability to modify operational methods, equipment
70
tools and business applications. The key objective of
process innovations is to minimize the production costs
among all units or items, improve the quality of products
or services, and ensure greater customer satisfaction
(Gunday et al., 2011). Firms focus on process innovation in
order to ensure the speed of service delivery and provide
customers with added values through implementing
efficient systems and applications (Lawson & Samson,
2001). Moreover, the legal framework for overseeing the
impact on businesses on the environment and minimizing
the emissions of CO2 has forced several firms to improve
process innovation (Theißen et al., 2014). Aina et al. (2019)
revealed that the Kingdom of Saudi Arabia is currently
putting high efforts on sustainable urban development
and environmental protection. The country believes in the
strength of information technology and innovation for
achieving its sustainable development objectives and
improving its ranking in this area. Accordingly, process
innovations which conform to the government regulations
can increase environmental sustainability. These views
are in line with Rauter et al. (2019) who outlined that
process innovation enables entrepreneurs to achieve better
sustainability for their businesses. Consequently, the third
hypothesis is presented as follows.
H3: 
Process innovation has a positive effect on
business sustainability.
Finally, marketing innovation has been established as
an important type of innovation that exerts significant
impact on business growth. Marketing innovation was
described in the literature as a firm’s ability to develop
effective marketing programs for creating a product
or service that fulfils market needs, company objectives
and social well-being. It was also conceptualized by
previous studies (Gunday et al., 2011; Karlsson &
Tavassoli, 2015) as the ability to design contemporary
marketing approaches that foster customer value based
on price, marketing communication tools, marketing
channels, product development and product packaging.
According to Alshuwaikhat and Mohammed (2017), the
government of Saudi Arabia has established a vision
for 2030 in efforts to place the country on the route to
sustainable economic development and growth. The
authors added that the country is also aware that the SMEs
represent important catalysts for shaping economic
development because they contribute significantly to
exports, job creation and support innovations. Innovative
marketing can be established when a firm expands its
current markets, position its products and services in the
minds of customers differently, and use effective means for
reaching and attracting customers. Kotler (1991) also
stated that innovative marketing requires firms to design
appealing pricing strategies, improve the features of
their products or services, minimize the production costs,
use environmentally friendly materials, and maximize
FIIB Business Review 11(1)
Figure 1. Theoretical Framework
Source: The authors.
customer coverage at lower costs. Mariadoss et al. (2011)
confirmed that marketing capabilities which stem from
the ability to innovate improve corporate sustainability.
On the basis of above literature, the following hypothesis
is postulated.
H4: 
Marketing innovation has a positive effect on
business sustainability.
Overall, the majority of previous studies reveal that
innovation capabilities have significant positive impact on
business sustainability. When firms focus on green
innovation and look for new means to meet the expectations
and different claims of several stakeholders, they can
maintain their business on the long-term, fulfil social needs
and act responsibly towards environmental protection.
Therefore, drawing upon the above literature review and
underlying theory, the research framework for this article is
presented in Figure 1.
Methodology
This section presents the methodology for this research.
It begins by describing the data collection method and
procedure which highlights research approach used to
collect the data, population and respondents, sample size
and sampling methodology. After that, the details for
measurement of items were presented. In this subsection,
the number and sources of measurement items were
identified. All of the measures were taken from past studies
and validated before by several scholars, and for this reason,
they have been selected. Finally, the software which was
used for analysing the collected data was specified.
Data Collection and Procedure
This research used a cross-sectional method in which the
data were gathered using a structured quantitative survey
to measure and verify the effect of innovation capabilities
on business sustainability in SMEs in the Kingdom of
Saudi Arabia. Specifically, the SMEs which were selected
to conduct this study included firms that involve in different
business sectors, for instance, manufacturing, services,
Hanaysha et al. 71

restaurants, wholesale and retailing. The targeted to 25 staff. Last but not least, the descriptive statistics
respondents are comprised of managers and owners of the showed that most of the participants (58.5%) are from the
SMEs and the data was collected from 171 participants service industry, 34.3% from trade industry, while 7.2%
using simple random sampling technique. After obtaining came from manufacturing sector.
the list of respondents from selected enterprises, they were In order to check the likely existence of common-
approached for participating in the study. The period method variance bias among constructs, this article relied
of data collection was between August and November on the CFA and single factor test of Harman (1960), and
2020, and the subsequent procedures were followed to full collinearity test which is presented in the next section.
collect the data: (a) The designed questionnaires were When all of the 31 measurement items of the constructs
approved by two industry experts and two academic staff at were constrained to be loaded on one single common
higher education institutions to ensure the clarity and factor, the overall variance explained by the general latent
appropriateness of the questions; (b) respondents were variable was lower than the Harmin’s threshold value of
contacted before sending the questionnaire to explain the 50%, indicating that the final model is considered free
purpose of the study and confirm their willingness in from common method bias.
participating and answering the survey; (c) The respondents
were assured of highest confidentiality of data and
anonymity of the identity; (d) Some guidelines regarding Multicollinearity Test and Correlations
the completion of the survey were provided to minimize It is important to test the Multicollinearity before
all possible errors.
proceeding to further analysis to ensure that the data is
free from significant issues. Multicollinearity arises when
Measures two or more variables have high correlation (0.9 or above)
The questionnaire was developed after referring to the with each other in the model to be estimated (Tabachnick
previously published studies on the selected constructs. & Fidell, 2001). It can be tested via different methods.
In details, business sustainability was measured based on However, in this article, we focused on the most commonly
various items which were developed by Khan and Quaddus used measure, that is variable inflation factors (VIF).
(2015). The participants were requested to rate the The procedure using VIF has been preferred by many
sustainability practices of their firms according to three researchers (e.g., Ullah et al., 2021) as it provides an
key aspects, namely, environmental, economic and social indication for the correlation of a variable with a set
sustainability with a total number of 12 items as follows— of other variables. A value of VIF that is more than
environmental (four items), economic (four items) and 5 demonstrates there is multicollinearity. The statistical
social (four items). Moreover, four items were employed analysis for this study as presented in Table 1 show that
for measuring product innovation. The items were the values of VIF in a full collinearity test are in the
originally validated by Jajja et al. (2014). Service acceptable range (less than 5), and this indicates the is no
innovation was also measured through five distinct items multicollinearity issues (Podsakoff et al., 2003; Shahzad
taken from Ndubisi et al. (2015) with minor modification et al., 2020). Furthermore, the correlation values between
to fit the SMEs context. Similarly, process innovation was the variables are also positive and significant and did not
measured through five items taken from Ndubisi et al. exceed 0.90 (see Table 2).
(2015). The measurement scales of marketing innovation In this research, the reliability of measurement scales
were also adopted and adapted from Lin et al. (2010). The was estimated using the Cronbach’s alpha coefficient
whole items which were adapted from the stated previous
studies were measured on a five Likert scale type which Table 1. Collinearity Statistics
ranges from 1 ‘strongly disagrees’ to 5 ‘strongly agree’. To Construct Item VIF
analyse the collected data, PLS-SEM software was used.
Product innovation PI1 1.801
PI2 2.212
Analysis of Results PI3 1.895
PI4 1.556
The frequency analysis indicated that 72.4% of the Service innovation SI1 1.633
respondents are managers, whereas 27.6% are owners. SI2 1.727
With regards to the experience background, 9.6% of the SI3 1.617
participants had less than 5 years and 33.2% had from 6 to Process innovation PRCI1 1.549
10 years. The participants whose work experience ranged PRCI2 2.264
PRCI3 3.071
from 11 to 15 years represented 17.8%, while 39.4% had
PRCI4 2.669
16 years of work experience or above. With regard to PRCI5 1.644
number of the staff in the firm, the frequency table indicated Marketing innovation MI1 1.849
that 46.1% of the participants are from firms which have 5 (Table 1 countinued)
72 FIIB Business Review 11(1)

(Table 1 countinued) which has also been widely used in the prior researches due
Construct Item VIF to its accuracy in determining the internal consistency
among measurement items. As shown in Table 3, the
MI2 2.044
MI3 2.198 Cronbach’s alpha for business sustainability (0.930),
MI4 1.817 product innovation (0.824), service innovation (0.789),
MI5 1.258 process innovation (0.845), and marketing innovation
Business sustainability ES1 2.980 (0.796) exceeded the minimum tolerable value of 0.7 as
ES2 1.479 suggested by Hair et al. (2010). Composite reliability was
ES3 2.500 also conducted to support the reliability assumptions, and
ES4 2.736 the findings showed that the values for all constructs are in
SS1 2.788 the tolerable range. Furthermore, the discriminant validity
SS2 3.606 test among all constructs was performed based on the
SS3 2.487 recommendations of Fornell and Larcker (1981). The
ENS1 2.683
authors highlighted that discriminant validity can be
ENS2 3.266
ENS3 2.151
achieved when the values of square root of the average
variance extracted (AVE) of each construct surpass the
Source: The authors.
inter-construct correlations. Generally, the findings

Table 2. Correlations

Construct Marketing Innovation Service Innovation Process Innovation Product Innovation Business Sustainability
Marketing innovation 1
Service innovation 0.453** 1
Process innovation 0.497** 0.494** 1
Product innovation 0.472** 0.499** 0.461** 1
Business sustainability 0.602** 0.619** 0.635** 0.599** 1
Source: The authors.
Note: ** p < .01

Table 3. CFA Analysis

Construct Item Factor Loading Cronbach’s Alpha Composite Reliability AVE

Product innovation PI1 0.783 0.824 0.884 0.656
PI2 0.874
PI3 0.821
PI4 0.757
Service innovation SI1 0.855 0.789 0.875 0.701
SI2 0.859
SI3 0.797
Process innovation PRCI1 0.673 0.845 0.890 0.622
PRCI2 0.774
PRCI3 0.884
PRCI4 0.873
PRCI5 0.715
Marketing innovation MI1 0.789 0.796 0.861 0.559
MI2 0.806
MI3 0.813
MI4 0.755
MI5 0.540
Business sustainability ES1 0.804 0.930 0.941 0.617
ES2 0.571
ES3 0.796
ES4 0.803
SS1 0.793
SS2 0.861
SS3 0.784
ENS1 8.842
ENS2 0.896
ENS3 0.749
Source: The authors.
Hanaysha et al. 73

Table 4. Discriminant Validity

Business Marketing Process Product Service

Sustainability Innovation Innovation Innovation Innovation
Business sustainability 0.786
Marketing innovation 0.601 0.747
Process innovation 0.658 0.495 0.788
Product innovation 0.612 0.470 0.476 0.810
Service innovation 0.630 0.457 0.511 0.503 0.837
Source: The authors.

presented in Table 4 reveal that the discriminant validity
assumptions are fulfilled.
Additionally, confirmatory factor analysis (CFA) was
conducted using the PLS Algorithm after removing the
incomplete questionnaires and replacing all missing
values for all items. CFA analysis was done in order to
ensure that the items for measuring each variable are free
from any error. In addition to that, CFA was executed in
order to test the unidimensionality of the items of each
construct and to estimate the measurement model before
proceeding to the structural model and hypotheses testing.
This process was done by ensuring that the factor loadings
of the measurement items exceeded the threshold value
of 0.5 (see Figure 2). However, two items for service
innovation, two item for business sustainability, and one
item for product innovation were removed because their
loadings did not reach 0.5. Kenny (2012) reported that
the minimum acceptable number of final items for each
construct in the structural model is two. Moreover, the
AVE values for all constructs (see Table 3) exceeded 0.5
which support the existence of convergent validity.
Therefore, the final results of CFA have fulfilled the
assumptions of convergent validity.
In order to verify the proposed hypotheses, the statistical
results were derived from structural model via Smart
PLS-SEM. As mentioned above, the verification of the
hypotheses was possible after maintaining adequate factor
loadings for the items in the measurement model. The
results as can be seen in Table 5 revealed that product
innovation has a positive impact on business sustainability
(β = 0.233, t-value = 2.489, p < .05), hence, H1 is accepted.
It was also found that service innovation (β = 0.254, t-value
= 2.416, p < .05) and process innovation (β = 0.306, t-value
= 3.340, p < .05) positively affected business sustainability,
and this indicates that H2 and H3 are also accepted. Finally,
the results showed that marketing innovation (β = 0.224,
t-value = 3.162, p < .05) has a significant positive impact
on business sustainability; hence, H4 is accepted. All of the
innovation capabilities explain 63.9% of overall variance
in business sustainability.

Figure 2. Measurement Model

Source: The authors.
74
Table 5. Results of Hypotheses
Hypothesis
Product innovation → Business sustainability
Service innovation → Business sustainability
Process innovation → Business sustainability
Marketing innovation → Business sustainability
Source: The authors.
Discussion
This study was directed towards examining whether
innovation capabilities, namely, product innovation,
service innovation, marketing innovation, and process
innovation have any effect on business sustainability in
SMEs’ context. The findings revealed that product
innovation is important for achieving business sustainability,
and this is in line with past researches (Hamel, 1991) which
reported that organizations which offer innovative products,
conform to acceptable operational standards and able to
satisfy different market needs through offered improved
product features are likely to have better performance
on the long term and can sustain their businesses in the
presence of competition. Chandra and Neelankavil (2008)
also verified that successful firms regularly introduce
innovative products to meet customers’ expectations and
outperform competitors. Additional evidence was seen in
the research of Hallstedt et al. (2013) who confirmed that
product innovation affects business sustainability and it is
vital for brand positioning, especially when firms introduce
new products that contain distinguished features and are not
harmful to the environment. The results of this study also
confirmed the second hypothesis which stated that service
innovation has a positive impact on business sustainability.
Further support was seen in the prior research which
testified the importance of service innovation in determining
firm performance and business survival (Eggert et al.,
2014). According to Johne (1999), firms which develop
their service innovations tend to engender higher profits
and maintain themselves in business markets on the long-
term. Other scholars (Akhisar et al., 2015; Kim & Lennon,
2017) further showed that the ability of entrepreneurs to
sustain their businesses requires upgrading their products
and services on continuous basis.
The empirical results also confirmed that the impact of
process innovation on business sustainability is positive
and statistically significant. Process innovation enables
organizations to improve their production methods and
delivery of available products or services, and it can be
considered as an effective approach to nurture business
growth and performance (Canh et al., 2019). Rousseau
et al. (2016) illustrated that entrepreneurs who emphasize
on innovative products and processes achieved greater
performance. In addition to that, process innovation has
been regarded as an important strategy to minimize
production and delivery cost of each unit, improve quality,
and to generate new or value-added products (Gunday
FIIB Business Review 11(1)
Beta Std Deviation t-value p
0.233 0.094 2.489 .013
0.254 0.105 2.416 .016
0.306 0.092 3.340 .001
0.224 0.071 3.162 .002
et al., 2011). Bellucci et al. (2020) reported that firms can
improve their business sustainability through process
innovations. The authors stated that process innovation is
primarily linked with the speed and quality of service
delivery and business operations, and to the two other
components of production performance: cost efficiency
and flexibility. Therefore, it is suggested that firms have to
place sufficient emphasis on the investment in process
innovations, because this form of innovation has been
found to be a key tool for attaining sustainable competitive
advantage.
Finally, the statistical tests confirmed that marketing
innovation has a positive impact on business sustainability.
The finding is in agreement with Mariadoss et al. (2011)
research who considered marketing innovation as a key
driver of sustainable development. The earlier literature
supported the finding and documented that innovation in
marketing is necessary for enhancing a firm’s capabilities
in offering distinguished products and services based on
understanding the marketplace and the needs of customers
(Akhisar et al., 2015; Galli, 2019). The statistical results
reveal that innovation in marketing is a key priority for
enhancing brand performance and achieving business
sustainability (Quaye & Mensah, 2019). According to
Martos-Partal (2012), marketing innovation is the foremost
important strategy for sustaining a business. Overall,
innovative firms are likely to have better brand images and
maintain themselves in target markets when they emphasize
on satisfying the needs of business stakeholders and come
up with solutions that ensure the harmony of the society and
ecological environment (Figg, 2000). Thus, entrepreneurs
in the SMEs should be innovative in designing their
marketing strategies (packaging, distribution network,
product placement, pricing, product design and promotions)
and offer the right combination of products and services to
customers using advanced technologies and different media
channels (Gunday et al., 2011).
Limitations and Future Research
A number of limitations exist in this research which can
be addressed in the future. Firstly, this study was mainly
centred towards investigating the direct effects of
innovation capabilities on business sustainability. Therefore,
in order to get further insights about the determinants of
business sustainability in SMEs context, it is recommended
to examine other predictors, for instance, digital marketing
Hanaysha et al.
and supply chain practices. Secondly, the data in this
research were collected from SMEs in the Kingdom of
Saudi Arabia; hence, future studies can conduct similar
research in large firms. In addition to that, convenience
sampling technique has its own limitation; consequently,
upcoming researches can rely on random sampling
techniques to generalize the results. Moreover, the sample
size employed to conduct this study was limited to the
managers and owners of SMEs. Therefore, future research
is suggested to rely on bigger sample sizes and target other
employees in order to ensure that the reliability as well as
validity of the findings are not violated. Last but not least,
the data was collected from a Middle East country, hence
future research can replicate the model in different regions
to get greater insights and confirm the results.
Conclusion and Implications
The purpose of this research was to test whether innovation
capabilities have any significant impact on business
sustainability in the SMEs’ context. The findings
demonstrated that all of the selected innovation capabilities
are positively associated with business sustainability. The
main contribution of this study consists of proposing an
integrated framework for companies in order to obtain a
sustainable competitive advantage through innovation
capabilities. In prior studies, these capabilities of innovation
have been investigated separately, hence, leaving the
resulting cumulative understanding is incoherent. Moreover,
there is a lack of research on marketing innovation and
business sustainability, and the majority of previous studies
focused mainly on product, process, and service innovations.
By integrating these factors together, this research framework
provides a more holistic context of improving business
sustainability within organizations and contribute to
institutional theory by bring new insights from a Middle
East country. In addition to that, the previous researches on
this topic in Middle East region are very limited; therefore,
this article was designed to fulfil existing gaps in the
literature. By combining innovation capabilities together as
it appears in the suggested framework, the likelihood of
effectively building a sustainable enterprise increases.
The findings of the present study also offer important
implications for business practitioners and managers.
First, managers should realize that business sustainability
is vital to their firms for obtaining distinctive competitive
advantages. The proposed framework could be used by
the business practitioners in an attempt to integrate
sustainability practices and innovation strategies into
their firms for fulfilling business objectives. In other words,
the growing competition in today’s dynamic business
environment urges firms to focus on innovation practices
for creating sustainable competitive advantages, because
the most effective way a firm can follow to ensure its
prosperity and survival on the long term is through
innovation. Based on the above discussion, we believe that
75
innovation capabilities provide SMEs with greater values
and enable them to fulfil their economic, social, and
environmental performance. Business practitioners are
also recommended to build successful relationships
with supply chain members who could support them
in developing innovative green products. They should
further adopt innovative marketing approaches through
capitalizing on the internet technologies and ensure
effective operations process to minimize the cost and
environmental stress. For instance, using social and internet
application can be useful for promoting organizational
products and achieving sustainability objectives.
In summary, we believe that present study has improved
our knowledge by providing empirical evidence on the
linkages between innovation capabilities and business
sustainability in small and medium enterprises. It is hoped
that this research opens avenues for further theoretical
refinement and empirical examination in this significant
field of research. Based on the statistical results, firms
are recommended to put greater emphasis on reinforcing
their innovation capabilities when adopting sustainable
practices, particularly in introducing new products and
constructing or enhancing production processes in order
to improve their performance. The ability of a firm to
develop sustainable and innovative solutions, either by
emphasizing on process innovations, service innovations,
marketing innovation, and/or product innovations can be
regarded as a valuable firm’s resource. Therefore, the
practical implications of the research are to offer insights
for business entrepreneurs and practitioners to invest in
innovation for improving sustainability performance.
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect
to the research, authorship and/or publication of this article.
Funding
The authors received no financial support for the research,
authorship and/or publication of this article.
ORCID iD
Jalal Rajeh Hanaysha https://orcid.org/0000-0002-6290-6006
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About the Authors

Jalal Rajeh Hanaysha is currently an Assistant Professor at Skyline University College, Sharjah, United
Arab Emirates. He obtained his PhD majoring in Management from Universiti Utara Malaysia, Malaysia,
in 2015, as well as an MSc (Management) from Universiti Utara Malaysia in 2011. He also received a
bachelor’s degree in Marketing from Arab American University, Palestine in 2008. To date, he has published
more than 60 research articles in international journals and conferences. He also received several awards for
best research papers being presented at local and international conferences. His research interests include
business management and marketing, in particular branding, consumer behaviour, social media marketing, CSR, business
and product innovation, human resource practices and business strategy. He can be contacted at jalal.hanayshi@yahoo.com

Mohammed Emad Al-Shaikh is an Assistant Professor of Entrepreneurship and Vice Dean of College of
Business Administration at Imam Abdulrahman bin Faisal University (IAU), Saudi Arabia. He is also
the head of the IAU Entrepreneurship unit and business incubator. He has completed his Doctor of
Business Administration in entrepreneurship. He has also completed bachelor and master of business
administration in marketing. His research interests include: business incubators and accelerators,
entrepreneurial marketing, consumer behavior, entrepreneurship and business sustainability. He can be
reached at mealshaikh@iau.edu.sa

Shanmugan Joghee is an Associate Professor of Marketing and Discipline leader of International Business
and Marketing Department at School of Business, Skyline University College, Sharjah, United Arab
Emirates. He holds an MBA in Marketing and Systems, PhD in Business Administration (Marketing) and
GMP (IIM-A). He received the Overall Academic Excellence award winner for the academic year
2014–2015 and Excellence in Teaching award for the academic year 2019–2020 at Skyline University
College. His research interests are branding, consumer behaviour, digital marketing, marketing information,
business economics and entrepreneurial marketing. His papers appeared in Journal of Brand Management (SSCI),
International Journal of Sustainable society, International Journal of Business Perspectives, Journal of Business Economics
and Management, European Journal of Business Management, International Journal of Financial Studies, etc. to name a
few. He can be contacted at shanmuganj@gmail.com

Haitham M. Alzoubi is an Associate Professor at the Skyline University College, UAE, he has been in the
academic field since 2002. He holds PhD in Management. His research interests lie in the area of operations
management, quantitative management, supply chain management, human resources and information
systems as well as e-supply chain management. He has served on roughly 40 research papers as well as
conferences and academic committees. Besides that, He is the author to seven books and attended tens of
training courses. He has a professional experience as a human resources consultant with big companies for
the last six years. He can be reached at haitham.alzubi@skylineuniversity.ac.ae