Evaluating the role of strategic innovation in enhancing competitive advantage in post-pandemic SMEs: A comparative study across sectors

Abstract

This study evaluates the role of strategic innovation in enhancing competitive advantage among small and medium-sized enterprises (SMEs) in the post-pandemic business environment, with a comparative analysis across manufacturing, service, and technology sectors. Adopting a systematic literature review approach guided by the PRISMA framework, the research synthesizes evidence from 80 peer-reviewed studies published between 2020 and 2025. The study is grounded in the Resource-Based View, Dynamic Capabilities Theory, absorptive capacity, and innovation ecosystem perspectives to explain how SMEs leverage innovation to respond to post-COVID-19 disruptions. The findings reveal that strategic innovation significantly contributes to competitive advantage; however, its adoption and effectiveness vary across sectors. Technology SMEs demonstrate the highest level of innovation adoption, primarily through digital transformation and product innovation, resulting in stronger performance outcomes. Service SMEs emphasize customer-centric and digital service innovations, leading to improved engagement and operational efficiency. In contrast, manufacturing SMEs focus largely on process innovation, with comparatively moderate competitive gains due to structural and resource constraints. The study also identifies leadership capability, organizational culture, and digital readiness as critical internal drivers, while market dynamics, government support, and technological infrastructure serve as key external influences. The results indicate that the relationship between strategic innovation and competitive advantage is context-dependent and mediated by sectoral characteristics, firm capabilities, and environmental conditions. By providing a cross-sectoral synthesis, this study contributes to the strategic innovation literature by explaining how SMEs can tailor innovation strategies to enhance resilience and competitiveness in post-pandemic markets. The findings offer practical insights for SME managers and policymakers seeking to promote sector-specific innovation-driven growth and long-term sustainability.