Social innovation, value creation, and differentiation capability building of SMEs in an emerging market: Evidence from Vietnam

Abstract

This study examines how and when social innovation orientation enables SMEs in emerging markets to build differentiation capability. Drawing on the dynamic capabilities' perspective, we argue that firms translate socially oriented innovation efforts into competitive advantage through social value creation, particularly under conditions of high competitive intensity. Using multi-wave survey data from 223 manufacturing SMEs in Vietnam, we test a moderated-mediation model. The results reveal that social innovation orientation positively influences differentiation capability via social value creation and that this indirect effect strengthens when competitive intensity is high. The findings highlight social innovation as a higher-order dynamic capability that allows firms to reconfigure resources for simultaneous economic and societal value creation. By demonstrating how social value creation converts social purpose into strategic distinctiveness, this study advances theory on dynamic capabilities, social innovation, and competitive strategy in emerging-market ventures.