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The purpose of this study is twofold: to examine the impact of entrepreneurial competencies and innovation on manufacturing small and medium-sized enterprises' (SMEs) sustainable performance and to explore the role of innovation as a mediator on the relationship between entrepreneurial competencies and manufacturing SMEs' sustainable performance.

Data collected from manufacturing SMEs in Malaysia were analysed via the partial least squares-structural equation modelling (PLS-SEM) approach.

The results reveal that entrepreneurial competencies play a robust and noteworthy role in promoting innovation and the sustainable performance of manufacturing SMEs, respectively. Further, innovation has a partially mediated effect on the link between entrepreneurial competencies and manufacturing SMEs' sustainable performance. Manufacturing SMEs' aspirations to be the first to market with new products are reflected in these SMEs' implementation of positive entrepreneurial competencies or capabilities which enable them to scan the environment to identify high-quality business opportunities and respond through these SMEs' Research and Development (R&D) activities to create products that provide real benefit to customers' needs. Hence, these SME's seize the market opportunities.

Manufacturing SMEs' sustainable performance should be strengthened by linking entrepreneurial competencies with innovation to nurture greater agility to respond quickly to change and market demands. These SMEs should conduct tactical meetings on a regular basis to discuss current projects and assess critical indicators, as well as to identify and test fresh ideas for innovation and new business ventures in order to achieve sustainable performance in challenging business environments.

By applying the resource-based view (RBV) theory and the triple bottom line (TBL) framework into a single framework, this study highlights the role of innovation as a meaningful mediator between entrepreneurial competencies and manufacturing SMEs' sustainable performance. As exploration of this relationship has been very limited, the study makes a novel contribution to the extant literature.