Institutional Framework and The Performance of SMEs In Uganda: The Mediating Role Of Competitive Advantage

The purpose of this study was to establish the direct influence of institutional framework and competitive advantage on small and medium enterprises (SME) performance and to examine the mediating role of competitive advantage in the relationship between institutional framework and performance of SMEs. This study employed structural equation modelling to determine if competitive advantage significantly mediates the relationship between institutional framework and SMEs' performance using Analysis of Moments Structures (AMOS), as recommended by Hair et al. (2022) and Baron and Kenny (1986). Study findings revealed that competitive advantage fully mediates the relationship between the institutional framework and SME performance. As such, institutional framework is only relevant in fostering SME performance if it goes through competitive advantage to attain improved performance, rather than its direct impact. This paper confirmed that competitive advantage fully mediates the association between the institutional frameworks and performance of SMEs using evidence from Uganda’s manufacturing sector, unlike extant studies that explored the direct relationships between the study variables in predicting SME performance.