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The purpose of this study is to understand how leaders of entrepreneurial small and medium-sized enterprises (SMEs) in Australia and Pakistan strategise and design their organisational environments to enable innovation and enhanced organisational performance.

Drawing from the resource-based view (RBV) theory, this study investigates the mediating role of workplace innovation between design leadership and organisational performance across entrepreneurial SMEs in Australia and Pakistan. Data were obtained from 367 top-level executives in Australia and 367 from Pakistan using paper-based and online surveys.

The results highlight significant cross-country differences, indicating that entrepreneurial SMEs in Pakistan tend to overlook the creation of an enabling work environment favourable for innovation, which reduces the positive impact on organisational performance. In contrast, Australian SMEs exhibit a stronger alignment between innovation and performance outcomes.

The study makes a theoretical contribution by extending RBV theory within the contexts of design leadership, workplace innovation and SME performance, particularly in comparative international settings.

The findings offer actionable strategies for SME leaders, particularly in developing economies, highlighting the significance of encouraging internal abilities such as a conducive innovation culture. This could model strategic development and training schemes designed to achieve sustainable competitive advantage through improved organisational performance.

This study uniquely reveals the differential mediating effect of workplace innovation on the design leadership–performance nexus in developed versus developing countries. The absence of significant mediation in Pakistan stresses the distinct entrepreneurial underlying forces and challenges faced by SMEs in developing economies.