Exploring the mediation role of innovation in the nexus between knowledge–sharing and firm performance

Purpose This study investigates the mediating role of innovation in the relationship between knowledge-sharing practices and firm performance, focusing on small and medium-sized enterprises (SMEs) in developing economies, specifically Ghana. It aims to understand how knowledge-sharing influences innovation and subsequently impacts operational and financial performance (FP). Design/methodology/approach A quantitative approach using structural equation modelling (SEM) was used. Data was collected from 320 SME employees in Ghana through a structured questionnaire. The study measures knowledge sharing, innovation speed (IS), innovation quality (IQ) and firm performance. Data was analyzed using Smart partial least squares and SPSS. Findings Results show that innovation mediates the relationship between knowledge sharing and firm performance. Explicit knowledge sharing significantly enhances IS, while tacit knowledge (TK) sharing improves IQ. IS and quality both positively impact operational and FP, with IQ having a stronger effect on long-term performance. Practical implications The findings provide practical insights for SME managers and policymakers on fostering knowledge-sharing cultures to drive innovation and improve performance. These strategies can help SMEs in developing economies become more competitive. Originality/value This research contributes to the literature by focusing on the mediating role of innovation within SMEs in a developing economy, specifically Ghana. It provides novel insights into how explicit and TK sharing contributes to innovation outcomes and firm performance. It offers both a theoretical and practical framework for further academic research and application in the industrial business and marketing sectors.