Entrepreneurial Networks and Sustainable Competitive Advantage in MSMEs: The Mediating Role of Dynamic Capabilities, Opportunity Recognition, and Sustainable Business Model Innovation

The shifting business landscape globally and within Saudi Arabia toward environmental sustainability requires a significant transformation in the business models of micro, small, and medium enterprises (MSMEs) to achieve long-term sustainable performance. This study investigates the factors that enhance firms’ sustainable business model innovation (SBMI), particularly in achieving sustainable competitive advantage (SCA) within the context of MSMEs in Saudi Arabia. Data were collected from more than 440 MSMEs using structured, web-based, closed-ended questionnaires and analyzed using partial least squares structural equation modeling. Drawing on the dynamic capabilities view and network theory, the findings indicate that entrepreneurial networks (ENs) are positively associated with dynamic capabilities, providing firms with the information and knowledge required to transform their capabilities toward greater sustainability. ENs are also positively associated with opportunity recognition, suggesting that MSMEs with favorable network positions are better able to identify and seize sustainable innovation-oriented opportunities. This, in turn, enables SBMI, which serves as a critical conduit between ENs, dynamic capabilities, opportunity recognition, and SCA. The findings suggest that managers should prioritize strengthening internal capabilities alongside ENs to better identify and capitalize on opportunities.