From talent management to competitive performance: The need to foster innovation in SMEs

This study examines the influence of talent management on the competitive performance of small and medium-sized enterprises (SMEs), incorporating innovation as a mediating variable and institutional support as a moderating factor. Drawing on data from 1721 Spanish SMEs and employing partial least squares structural equation modelling (PLS-SEM), the study empirically tests a comprehensive model linking these variables. The results confirm that talent management has a positive and significant effect on competitive performance, both directly and indirectly through innovation, which acts as a key mechanism transforming talent-oriented practices into tangible performance outcomes. Consequently, SMEs should invest in comprehensive talent management systems that not only focus on attracting, developing and retaining high-potential employees but also foster environments that promote creativity, learning and collaboration. Moreover, institutional support moderates this relationship by strengthening the link between talent management and innovation, indicating that favourable public policies can enhance the effectiveness of internal talent strategies in fostering innovative capacity.