Antecedents of Firm’S Performance. Empirical Evidence from Yemeni Sme’S

The purpose of this study is to examine the relationship between market orientation and firm’s performance in the context of SMEs of Yemen. Though lot of attention is given to study the relationship between market orientation and firm’s performance but still there is a considerable confusion about how this relationship is developed and where it is directed. It has been previously studied that market orientation and performance are directly related, but this paper will empirically analyze the relationship of other factors, learning orientation, risk taking orientation and innovation with the performance. Each of the construct was measured on 7-point likert scale ranging from 1 strongly disagree to 7 strongly agree, where market orientation has 15 items, learning orientation has 7 items, risk taking orientation has 5 items, innovation has 5 items and firm’s performance has 5 items. Four hundred self administered questionnaires were distributed to target respondents of SME’s in Aden, Ibb and Sanaa, Yemen. 249 questionnaires were completed and returned, so the response rate was 63%. The data was analyzed using Structural Equation Modeling (SEM) through AMOS 16. The goodness of fit indices of the revised structural model indicate adequate fit (GFI: 0.952, RMSEA: 0.028, Ratio: 1.19, P-value: 0.119). The regression parameter estimates show four significant relationships between innovation and market orientation (β=0.31 ,P-value>0.002 and C.R=3.148),innovation and learning orientation ((β=0.716, P-value=0.001 and C.R=3.671), learning orientation and firm’s performance (β=0.44,P -value=0.03 and C.R=2.168), firm’s performance and innovation (β=0.327,P-value=0.013 and C.R=2.482)