Social Media Adoption Effect on Innovation and Perceived Business Performance of Small and Medium-Sized Enterprises in Sri Lanka

This study investigates the effects of social media adoption on Small and Medium-Sized Enterprises (SMEs') perceived business performance, focusing on the Galle district. Employing a deductive approach, a conceptual model was developed and tested, examining social media adoption's direct and indirect influences on SMEs' performance, mediated by innovation. Data were collected through a questionnaire distributed among SME owners, CEOs, or top management members. Convenience sampling was utilized, drawing from the Sri Lanka Small and Medium Industries (SLCSMI) Board's register of registered establishments in the Galle district. From the initial 165 organizations sampled, responses from 116 SMEs were received after eliminating those indicating no or poor social media adoption. The direct effect of social media on net profit growth (NPG) is not statistically significant, suggesting that there is no significant linear relationship between social media and NPG after accounting for the mediator variable (innovation). The indirect effect of social media on NPG through the mediator variable (innovation) is also not statistically significant.
These results imply that while there may be a relationship between social media, innovation, and NPG individually, the relationship between social media and NPG may be mediated by the variable innovation, and this mediation effect is not statistically significant in this analysis. These findings contribute to understanding the dynamics of social media adoption in the context of SMEs, highlighting its potential to enhance business performance. Additionally, the study underscores the need for improved data infrastructure to facilitate more comprehensive research and policymaking in Sri Lanka's SME sector.