The concepts of market orientation (MO) and entrepreneurial orientation (EO) have been analyzed and discussed in the literature for more than four decades as a strategic posture of companies (Kim & Hur, 2024). These are two essential concepts in the analysis of internal and external factors that generate a higher firm performance (FP) (Boitumelo & Msimango-Galawe, 2023), especially in small and medium-sized enterprises (SMEs) (Mamo, 2017). Particularly, because MO generates an organizational culture focused on processes and products innovations articulated with the needs of consumers, competitive information, and coordinated internal responses to market information (Kim & Hur, 2024), while EO generates a proactive and innovative risk-taking company (Kim & Hur, 2024) to explore untapped needs in current or emerging markets (Covin & Slevin, 1989).

In fact, literature establishes, on one hand, that MO and EO are essential for achieving a higher FP in SMEs with limited capital and resources (Eisenmann, 2021; CB Insights, 2021); on other hand, that both MO and EO individually are insufficient to maintain the competitive advantage and FP of SMEs (Baker & Sinkula, 2009; Nassani & Aldakhil, 2023). However, although the relationship between MO, EO, and FP has been analyzed and discussed for more than four decades (e.g. Jawosrki & Kohli, 1993; Ramadani et al., 2017; Octavia & Ali, 2017; Wardi et al., 2018), the inconsistency in the results of published studies reinforces the need to apply empirical studies that provide robust evidence on the possible conflicts between these two strategic orientations and their relationship with FP (González- Benito et al., 2009; Mamo, 2017; Kim & Hur, 2024).

Additionally, the relationship between MO, EO, and FP in SMEs in developed countries has received significant attention from scientific and academic communities (e.g., Brouthers et al., 2014; Rodríguez-Gutiérrez & Tejada, 2015). Nevertheless, the relationship between these concepts in SMEs in developing countries has received little attention (Mamo, 2017; Kim & Hur, 2024), which is why researchers and academics call for future studies are oriented towards providing empirical evidence of the influence of MO, EO, and FP on SMEs in different environments and specific cultures (Raju et al., 2011; Soininen et al., 2013), and in the SMEs of developing countries (Mamo, 2017; Kim & Hur, 2024); especially, the simultaneous analysis of the three concepts and when EO acts as a mediating variable between MO and FP (Boitumelo & Msimango-Galawe, 2023; Kim & Hur, 2024).

In this sense, the objective of this study is to analyze and discuss the effects of MO, EO, and FP in the context of SMEs in a developing country. To do so, an empirical study was carried out in Mexican SMEs using a sample of 368 companies, the research model was estimated by Partial Least Square Structural Equation Modeling (PLS-SEM) with the SmartPLS software 4.0 (Ringle et al., 2022).

It is essential to analyze SMEs for two basic reasons: first, because they are the largest number of existing companies in Mexico; second, because they contribute more than 50% of GDP and employment at the national level (INEGI, 2023).

Furthermore, the literature review reveals that the relationship among MO, EO, and FP remains unanalyzed and discussed in various strategically important countries such as Brazil, India, and Russia, and in regions of Middle East, Africa, and Latin America (Wales et al., 2011; Mamo, 2017). This indicates the lack of empirical knowledge on the potential contribution and integral value of simultaneous relationships among MO and EO and their relationship with FP in SMEs from developing economies, which is still not clearly and completely understood (Mamo, 2017; Kim & Hur, 2024).

Under this context, the main contribution of this study is the provision of robust empirical evidence of the existing relationship between MO, EO, and FP, as well as the role of EO as a mediating variable in the link between MO and FP in SMEs of an emerging economy. Particularly, due to the entrepreneurial spirit that SMEs must make the changes and improvements required by customers and the business environment in the shortest possible time, which generates a proactive environment in the innovation of products more oriented to the needs of consumers, which will facilitate the adoption and implementation of MO and EO, as well as significantly improving their FP level.

To validate the hypotheses of the research model, an empirical study was carried out in SMEs in Mexico. The procedure used to obtain the data consisted of the 2021 Business Directory of the Mexican Business Information System (SIEM), which had 34,500 SMEs (INEGI, 2021) and employing simple random sampling with a maximum error of ±5% and a reliability of 95%, the sample required was 300 SMEs. However, 500 surveys were sent to obtain at least the number of surveys required to conduct the study, finally obtaining 368 surveys with a response rate of 73.6%, which allowed the sample to be representative of the population under study. In addition, the survey was applied from February to May 2022 and was delivered to company managers, who identified the people in the SMEs with the appropriate knowledge to answer the different groups of questions asked in the survey. The characteristics of the sample are presented in Table 1.

To measure MO, Narver and Slater (1990) scale was considered. It considers three dimensions: customer orientation with 6 items, competence orientation with 4 items, and interfunctional coordination with 5 items. EO was measured using the scale proposed by Miller (1983) with adaptations from Covin and Slevin (1991), Lumpkin and Dess (2001), and Dess and Lumpkin (2005), who stated that this orientation can be measured through three dimensions: innovativeness with 6 items, risk-taking with 6 items, and proactivity with 6 items. Finally, FP was measured through Tan and Litschert (1994) scale with 3 items. All items of the scales used in this study were measured using a five-point Likert-type scale with 1 = total disagreement to 5 = total agreement as limits.

Furthermore, to avoid biased responses in the survey and reduce the possibility of obtaining lenient responses that were socialized between companies, the bias of the common method variance (CMV) was analyzed using Harman's single factor (Podsakoff et al., 2003), which suggests the application of an exploratory factor analysis with a common factor that explains at least 40% of the total variance. Results show that the Kaiser-Meyer-Olkin coefficients (KMO = 0.899), and Bartlett's sphericity test [X² (630) = 13,720.203, p < 0.000] are significant, and the common factor extracted from data is 35.76%, which is lower than the recommended value. This suggests that CMV is not a threat to sample data of this study and does not seem to significantly affect the relationships between variables of the research model (Podsakoff et al., 2012).

The reliability of MO, EO, and FP scales was evaluated using Cronbach's Alpha, Dijkstra-Henseler rho, Composite Reliability Index (CRI), and Average Variance Extracted (AVE), while the discriminant validity was evaluated through Fornell and Larcker Criterion and Heterotrait-Monotrait ratio (HTMT) (Henseler, 2018). The results obtained from PLS-SEM application in the evaluation of MO, EO, and FP reliability measurement scales are presented in Table 2. It can be observed that Cronbach's Alpha, Dijkstra- Henseler rho, and CRI values are higher than the recommended of 0.70, while AVE is higher than the recommended value of 0.50, which gives indications that the research model has a good fit data (Hair et al., 2020).

Table 1

Variable	Frequency	Percentage
Firm's Age
Young Companies (less than or equal to 10 years)	117	31.0
Mature Companies (more than 10 years)	261	69.0
Total	368	100.0%
Company Size
Small (10 to 50 employees)	127	33.6
Medium (51 to 250 employees)	153	40.5
Large (more than 250 employees)	98	25.9
Total	368	100.0%
Family Character
Family Business	106	28.0
Non-Family Business	272	72.0
Total	368	100.0%

Source: own elaboration.

To respond the hypotheses raised in the research model, a PLS-SEM was applied with SmartPLS 4.0 software (Ringle et al., 2022), since PLS-SEM is generally used in the analysis of theories in development phase (Hair et al., 2019) and in various knowledge disciplines (Cepeda-Carrión et al., 2019; Ringle et al., 2020). Furthermore, PLS-SEM is essential when the study aims at predicting and explaining the constructs of the research model (Sarstedt et al., 2019). Additionally, the use composites in PLS-SEM, as a weighted combination of its indicators, facilitates explaining the measurement error of the constructs, which makes this method more powerful than multiple regression (Hair et al., 2019).

Table 3 shows the results obtained by applying PLS-SEM, and indicates that the estimated data from the research model have an acceptable statistical level with adjusted R² values of the endogenous variables (EO = 0.277; FP = 0.275) greater than the recommended value of 0.10 (Hair et al., 2020), an SRMR value less than 0.08, and the HI99 value (0.048; 0.065), lower than unweighted least squares discrepancy (dULS), and geodetic discrepancy (dG) values to HI99 values (1.69-1.716; 0.214-0.309) recommended by Sarstedt et al. (2019). The magnitude of the effects of independent variables (f²) on R² values of independent variables (MO) suggests small medium variations (values between 0.15-0.34) (Hair et al., 2017).

Additionally, the estimated data confirm our argument that MO has significant positive effects on FP (0.217; p-value 0.000) and EO (0.418; p-value 0.000). These results provide robust empirical evidence in favor of hypotheses H1 and H2, which indicate that the adoption and implementation of MO favor a higher FP and EO in SMEs. Moreover, results also confirm our argument that EO has significant positive effects on FP (0.272; p-value 0.000), thereby providing robust empirical evidence in favor of hypothesis H3, which indicates that the adoption of EO also generates an increase in FP in SMEs.

Finally, the estimated data also confirm our argument that EO can act as a mediating variable in the relationship between MO and PF (0.314; p-value 0.000), thereby providing robust empirical evidence in favor of hypothesis H4, which indicates that an essential part of the positive effects of MO on SMEs' FP is transferred by EO. Therefore, the adoption and implementation of EO activities in SMEs not only increases their FP but also can act as a mediating variable that helps SMEs to further increase their FP, if applied simultaneously with MO activities.

Table 2

PANEL A. Reliability and Validity
Variables	Cronbach's Alpha		Dijkstra-Henseler rho		CRI	AVE
Market Orientation	0.911		0.912		0.937	0.789
Entrepreneurial Orientation	0.943		0.945		0.955	0.779
Firm Performance	0.877		0.892		0.923	0.801
PANEL B. Fornell-Larcker Criterion			Heterotrait-Monotrait ratio (HTMT)
Variables	1	2	3	1	2	3
1. Market Orientation	0.848
2. Entrepreneurial Orientation	0.416	0.886		0.416
3. Firm Performance	0.328	0.360	0.895	0.340	0.383

Note: PANEL B: Fornell-Larcker Criterion: Diagonal elements (bold) are the square root of the variance shared between the constructs and their measures (AVE). For discriminant validity, diagonal elements should be larger than off-diagonal elements.

Table 3

Paths	Path (t-value; p-value)	95% Confidence Interval	f2	Support
MO → FP (H1)	0.217 (3.571; 0.000)	[0.093 - 0.333]	0.151	Yes
MO → EO (H2)	0.418 (8.822; 0.000)	[0.326 - 0.511]	0.318	Yes
EO → FP (H3)	0.272 (5.025; 0.000)	[0.167 - 0.377]	0.177	Yes
Indirect Effects
MO → EO → FP (H4)	0.314 (5.157; 0.000)	[0.165 - 0.272]	0.136	Yes
Endogenous Variable	Adjusted R2	Model Fit	Value	HI99
		SRMR	0.048	0.065
EO	0.277	dULS	1.694	1.716
FP	0.275	dG	0.214	0.309

Note: MO: Market Orientation; EO: Entrepreneurial Orientation; FP: Firm Performance. One-tailed t-values and p-values in parentheses; bootstrapping 95% confidence intervals (based on n=5,000 subsamples); SRMR: standardized root mean squared residual; dULS: unweighted least squares discrepancy; dG: geodesic discrepancy; HI99: bootstrap-based 99% percentiles.

Results obtained in this study support our argument that MO has significant positive effects on SMEs' FP. These results are similar to those obtained by Chaudhary and Batra (2018), and Masadeh et al. (2018). It could be explained by the idiosyncrasy of SMEs, since they generally are close with their customers and consider them as part of the family, which allows them to have a clear knowledge of their tastes and choices, thereby generating a preference for their products and, with it, an increase their FP. In this sense, despite the scarcity of resources for SMEs in emerging economy countries, they should to try to adopt MO so that they have greater possibilities of achieving competitive advantages and a higher FP.

Results also support our argument that MO has positive effects on the EO of SMEs, in line with those found by Montiel-Campos (2018), and Nassani and Aldakhil (2023). This positive effect could be explained by SME manager's fast decision-making for adapting the products to the tastes and needs of their clients, particularly because they are the owners of the companies and consider their employees as part of their own family; therefore, they join efforts to make changes in the production processes in the shortest possible time, thereby achieving not only client satisfaction but also the possibility of significantly increasing their FP.

These results also support our argument that EO has significant positive effects on FP of SMEs, these results being similar to those obtained by Wardi et al. (2018), and Raza and Fatima (2022). This positive result might be due to the ease of SMEs adaptation to the changes and requirements of both the market and the supply chain by generating a family-type work environment in companies that motivates the participation of all employees in the development of the organization's projects. This generates proactivity towards innovation that allow the resources and efforts of the SMEs to be directed at improving the articulation of the needs and satisfaction of their clients, which could improve their level of FP.

Finally, results support our argument that EO can play a mediating role in the existing link between SMEs' MO and FP; these results being in line with those found by Li et al. (2008), and Kim and Hur (2024). This positive result could be explained by the entrepreneurial spirit of SMEs to integrate changes into production processes, products and services in the shortest possible time, and adapt to the changing conditions of the business environment, despite the limitations they commonly have regarding access to financial resources, specialized personnel, and little support from the public administration of emerging economy countries, which could help them improve their FP.

The results obtained in this paper lead to several conclusions, for instance, even though SMEs in emerging economies frequently face the lack of technology and adequate technical skills in its use, market access, poor quality of their products, and productivity problems, the adoption and implementation of MO and EO increase SMEs probability of significantly improving their FP. However, it could be difficult to adopt MO and EO in SMEs from developing countries, which are generally characterized by having a turbulent business environment; therefore, SMEs will have to make a series of changes both in its structure and culture. Those changes require a commitment on the part of managers and their main business partners.

In these hostile environments, the adoption of strategic MO and EO should be a priority, as they can be used as a mechanism to compensate for the various limitations that SMEs face in a business environment that gives opportunities for proactive and innovative SMEs. This is demonstrated by the results of this study, which provide robust empirical evidence that MO and EO are excellent indicators to significantly improve SMEs' FP, particularly when EO acts as a mediating variable.

Finally, robust empirical evidence in favor of the existing relationship between MO, EO, and FP allows us to conclude that the benefits associated with the simultaneous adoption and application of the two strategic orientations are greater than the costs associated with it. In this sense, SMEs' FP does not depend only on the adoption and application of MO and EO guidelines, but also on the extent to which the link between MO and FP is associated with EO. This study also contributes to the ongoing debate in the current literature on whether the results of the simultaneous adoption and implementation of MO and EO substantially improve FP, and how these two can improve business activities by motivating staff, particularly in SMEs from emerging economies.

This study has limitations that should be considered before interpreting the results; the first one is related to the sample, since only manufacturing firms in Mexico with more than 10 employees were included, so the results could be different if a sample of firms with less than 10 employees. A second limitation is that the survey was applied to large companies, so the data may vary if only SMEs are considered. A third limitation is that, in this study, an analysis was carried out with the data obtained by applying a questionnaire to the managers of manufacturing firms, so the results can vary whether quantitative data or the opinions of key stakeholders are considered. Finally, this study only carried out an analysis with cross-sectional data, leaving aside the possible temporal effects of MO, EO, and FP, which is why it would be important to conduct longitudinal studies.