When innovation isn't enough: environmental turbulence and the limits of entrepreneurial success in the Middle East

Abstract

This study investigates how digital literacy, entrepreneurial orientation and digital networks drive entrepreneurial success directly and indirectly through digital innovation among Middle Eastern Small and Medium-sized Enterprises (SMEs), and whether environmental turbulence moderates these direct and mediated relationships. Drawing on the resource-based view and dynamic capabilities theory, a moderated mediation model is proposed and analyzed using partial least squares structural equation modeling on data collected from SME founders, co-founders and senior managers. Entrepreneurs' digital literacy, entrepreneurial orientation and digital networks each positively influence both digital innovation and entrepreneurial success. Digital innovation fully mediates all three capability-to-success pathways. Environmental turbulence negatively moderates all direct capability-to-outcome relationships and all mediated pathways through digital innovation, confirming full moderated mediation and establishing that high turbulence systematically attenuates the performance returns to internal capabilities. Policymakers and ecosystem builders in the Middle East should invest in digital skills development and platform accessibility as foundational prerequisites for entrepreneurial performance, while recognizing that capability-building interventions yield diminishing returns without concurrent efforts to stabilize the regulatory and macroeconomic environment. This study is among the first to validate digital innovation as a mediating mechanism between antecedent digital capabilities and entrepreneurial success in a Middle East and North Africa (MENA) context, and the first to demonstrate that environmental turbulence conditions the full mediation chain rather than discrete direct paths alone. The findings reframe environmental turbulence as a structural performance ceiling that no level of the internal capabilities under analysis full accumulation can fully overcome without parallel institutional stabilization, advancing both resource-based and dynamic capability theorizing in emerging market entrepreneurship.