INTERNATIONAL JOURNAL OF SUSTAINABLE

CONSTRUCTION ENGINEERING AND TECHNOLOGY

ISSN: 2180-3242 e-ISSN: 2600-7959 IJSCET
Vol. 15 No. 1 (2024) 48-68
https://publisher.uthm.edu.my/ojs/index.php/ijscet

Modelling of Non-Financial Factors Affecting Yemen Small

Medium Enterprises (SMEs) Performance Using AMOS
Esmail Hassan Mohamed Abdulrazaq1, Ahmad Nur Aizat Ahmad1*
1 Faculty of Technology Management & Business,
Universiti Tun Hussein Onn Malaysia, MALAYSIA

*Corresponding Author: [email protected]

DOI: https://doi.org/10.30880/ijscet.2024.15.01.005

Article Info Abstract

Received: 05 February 2024 This study exhibits the construction of a structural relationship model
Accepted: 05 February 2024 of Non-Financial Factors that include innovation, training, human
Available online: 26 February 2024 capital, and market orientation on the performance of Yemen's Small
Medium Enterprises (SMEs). The modelling was done using the AMOS-
SEM software. Structural Equation Modelling (SEM), route analysis, and
Keywords
confirmatory factor analysis are all performed using the software. It is
Non-Financial Factors, SME well-known for its visual approach, which enables users to graphically
performance build models with basic sketching tools and analysts to participate in
intricate statistical modelling. The modelling examines the specific
effects of these factors and discloses key contributors to the success or
failure of SMEs. Data used for modelling was collected from 350 valid
responses of employees in the Yemeni manufacturing SME. The
findings from the modelling highlight the dominant significance of
innovation, as proved by its highest beta coefficient of 0.90, signifying
its profound impact on SME performance. Following closely is training,
with a coefficient of 0.3, further establishing its crucial role in
influencing performance outcomes. Ultimately, this research concludes
that the four factors—human capital, innovation, training, and market
orientation—exhibit a statistically significant relationship with SME
performance within manufacturing sector. The inferences of these
findings are of paramount importance to policymakers and
practitioners as it offers actionable insights for enhancing SME
performance and driving economic growth within Yemen.

1. Introduction
Due to the prolonged political instability experienced in Yemen since 2015, there has been a notable increase in
the number of small and medium-sized enterprises (SMEs) in the country. This situation has led many employees
to work in fields unrelated to their professional qualifications to meet their basic needs. Consequently, SMEs in
Yemen are facing significant challenges as they lack essential components necessary for sustaining and improving
their operations, including human capital, innovation, training, and market orientation. Extensive research has
shown that incorporating these variables into SME operations contributes to superior performance and enables
them to thrive even in complex and economically volatile environments. Conversely, neglecting these variables
can have a detrimental effect on organizational performance (Buli, 2017). Yemen, being one of the poorest
countries, is currently facing an ongoing crisis characterized by a continuous decline in currency rates and high
inflation since 2018 (Bal-Kheer & Al-Nahdi, 2019). This economic situation has made it difficult for Yemeni SMEs

© 2024 UTHM Publisher. All rights reserved.

This is an open access article under the CC BY-NC-SA 4.0 license.
 49 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68

to adopt various forms of innovation. However, in a developing country like Yemen, innovation in product
development and marketing is crucial, and its absence significantly hampers organizational performance (Al-
Qershi, 2020). Scholars have emphasized the importance of studying the factors that influence the successful
adoption and utilization of innovations in businesses, emphasizing the need to analyze the impact of innovation
on organizational performance (Uğurlu & Kurt, 2016). The Yemeni Ministry of Industry and Trade (2017) has
reported that despite the large number of small and medium-sized manufacturing firms in the country, their
contribution to the GDP is not significant. The World Bank's assessment of Yemen's economic performance (2015)
also reveals the weakness of the industrial sector, attributing it to a lack of innovation. Over the years, the
contribution of the manufacturing sector to Yemen's GDP has declined. These findings highlight the challenges
faced by Yemeni SMEs in this regard (AlQershi, Abas & Mokhtar, 2018). Yemen's manufacturing industries
commonly face obstacles in their innovation processes, hindering their ability to develop valuable products and
meet evolving customer expectations. Despite the crucial importance of innovation for businesses of all sizes and
sectors, Yemeni businesses suffer from a scarcity of cutting-edge technology and rank low in global innovation
capacity (GII rankings, 2016). Considering the vital role of SMEs in Yemen's economic progress, extensive research
efforts are necessary due to the country's low rankings in terms of innovation, visible wealth, economic growth,
and job opportunities (AlQershi, 2020). Training holds a critical position for businesses, including SMEs, as it
enhances employees' skills and enables them to contribute effectively to the organization's goals. Market
orientation and innovation have a partially positive effect on competitive advantage and organizational
performance, indicating that an increase in market trends, competitive advantage, and innovation positively
influences organizational performance (Udriyah, Tham, & Azam, 2019). However, SMEs in Yemen face various
challenges, including limited technological and technical skills, restricted access to finance and markets,
workplace and infrastructure issues, lack of knowledge about international markets and production technology,
entrepreneurial skills, poor product quality, and concerns regarding productivity. Overcoming these challenges
requires significant commitment from SMEs and potential partners to become more market-oriented (Buli, 2017).
Human capital is a key factor for organizational success, and the capabilities it encompasses heavily influence
organizational performance. The relationship between human capital and SME performance has received limited
attention in countries with unique cultural practices, such as those in the Middle East, including Yemen. This
makes it an interesting subject for further research (AlQershi, Abas, & Mokhtar, 2019).

2. Small and Medium Enterprises (SMEs)

Small and Medium Enterprises (SMEs) constitute businesses within a specific size range, characterized by their
smaller scale compared to larger corporations, contributing significantly to global economic growth, employment
generation, and innovation (Badri, Nahidi, & Ghalami, 2018). Particularly vital in developing nations, SMEs are
considered the backbone of many economies, fostering entrepreneurship, local development, and economic
diversification (Ali, Hilman & Gorondutse, 2020). Their flexibility allows them to adapt more agilely to market
changes, establishing closer relationships with customers. Despite their importance, SMEs face challenges such as
limited access to financial resources and regulatory constraints. Initiatives, including microfinance programs and
government support, aim to address these challenges (Badri, Nahidi, & Ghalami, 2018). Notably, certain countries
have experienced economic growth due to favorable conditions for entrepreneurs and robust infrastructure
supporting innovation (Badri, Nahidi, & Ghalami, 2018).
Economists differentiate SMEs based on criteria such as employee count, ownership structure, workforce size,
income, and industry. Classification criteria vary across countries, including Saudi Arabia, Jordan, Egypt, Bahrain,
and Yemen, based on factors like workforce size, capital employed, and sales turnover (AlBar & Hoque, 2019;
Elseoud et al., 2019; Abdullah, Thomas, & Metcalfe, 2015). SMEs are crucial contributors to national economies,
fostering innovation, efficiency, and employment opportunities (Wu et al., 2017). They also play a role in poverty
reduction by increasing income ratios, creating job opportunities for youth, and providing affordable goods and
services to low-income segments of the population (Wu et al., 2017; AlBar & Hoque, 2019; Elseoud et al., 2019;
Abdullah, Thomas, & Metcalfe,

2.1 Yemeni SMEs

The Yemeni economy is predominantly characterized by the presence of micro and small enterprises (SMEs),
which constitute 97% of registered businesses in the private sector and contribute to over 90% of the country's
total employment. In contrast, medium and large companies are limited, and state-owned enterprises play a
significant role. The civil war in 2011 had a profound impact on the SME sector, resulting in job losses, salary
reductions, and extended periods of unpaid leave for employees. To realize its vision of a more stable, secure, and
prosperous Yemen, it is imperative to provide indirect support to the transition process. This involves fostering
the private sector to create employment opportunities and promoting increased investment in the economy. In
2013, a study conducted an in-country scoping analysis to scrutinize the primary obstacles hindering SME
development in Yemen, assess existing support mechanisms, and identify areas of deficiency. The study included
 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68 50

a political economy analysis that highlighted key features of the private sector. Additionally, an extensive donor-
mapping initiative within the private sector revealed a predominant donor focus on microfinance and
concentrated value chain development, particularly in the agricultural sector. Against this backdrop, the study put
forth several recommendations for potential interventions. Each recommendation was accompanied by a
balanced risk analysis, featuring a comprehensive table assessing the attractiveness and feasibility of
implementing these interventions across Yemen's 22 Governorates (Aliriani, K., 2013). Another study conducted
by Abdullah, Thomas, and Metcalfe, (2015) pointed out approximately 23.5% of SMEs in Yemen that embraced e-
business had workforces ranging from 1 to 9 employees, while 76.5% had employee counts between 10 and 49,
signifying a prevalence of medium-sized enterprises. Furthermore, around 51% of these SMEs had been in
existence for 10 years or less, with the remaining 49% surpassing the 10-year mark. The study suggests that
Yemeni SMEs are in the early phases of adopting e-business practices. In a 2021 study by Al-Hakimi, Saleh, and
Borade focusing on the entrepreneurial orientation and supply chain resilience of manufacturing SMEs in Yemen,
it was discovered that there exists a positive correlation between entrepreneurial orientation and supply chain
resilience in SMEs. Additionally, the study identified that this relationship is mediated by both absorptive capacity
and innovation. It was concluded that the enhancement of supply chain resilience in SMEs is achieved through
entrepreneurial orientation when accompanied by efforts to cultivate absorptive capacity and innovation.
Globally, small and medium enterprises (SMEs) have been recognized as crucial catalysts for the economic
development of both developed and developing nations, owing to their substantial numbers and the significant
workforce engagement they generate. In developing countries, SMEs constitute a substantial portion, accounting
for no less than 90% of businesses, contributing to 40–60% of the GDP, and playing a role in nearly 40% of global
industrial production and 35% of world exports (Asgary et al., 2020). However, in a developing context like
Yemen, despite SMEs dominating the manufacturing sector, their contribution to the national GDP is relatively
modest (Al-Hattami and Borade, 2021; Al-Hakimi, Hashed, Kabra, 2021). The manufacturing sector's contribution
to Yemen's GDP has experienced a decline, falling from 19% between 1990 and 1994 to 15% between 2005 and
2010, as reported by the World Bank in 2015. According to a 2020 USAID report, manufacturing SMEs in Yemen
only account for 9.9% of the GDP and employ a mere 4% of the workforce, indicating a notably low percentage
compared to other developing economies. This underperformance of SMEs in Yemen highlights a critical issue,
prompting academic researchers to investigate the primary factors contributing to this situation. One significant
challenge affecting the poor performance of Yemeni SMEs is the disruption of the supply chain caused by the
country's conflict and political crises. These disruptions encompass rigorous inspections at seaports limiting
imports, delayed delivery of raw materials, and increased costs.
The classification of a Small and Medium Enterprise (SME) varies across different countries, with criteria such
as the number of employees, annual turnover, and the company's balance sheet being essential for determination.
In European legislation, a Medium-Sized Enterprise is characterized by having a workforce ranging from 50 to
249 employees and an annual turnover less than or equal to 50 million Euros. A Small-Sized enterprise is identified
by a workforce between 10 and 49 employees, with an annual turnover not exceeding 10 million Euros.
Meanwhile, a Micro enterprise is a company with a workforce of 1 to 9 employees and an annual turnover of 2
million Euros or less (EC, 2005). Conversely, the Yemen Government defines SMEs differently, considering a
Medium-Sized Enterprise as having employees ranging from 10 to 50, and a Small-Sized enterprise as one with a
workforce between four and nine employees (YMIT, 2014). The comparative details are outlined in Table 1.

Table 1 Comparative of a Small and Medium Enterprise (SME)

Numbers of Employees
Types of Enterprises
European Definition Yemen Definition
Medium-Sized 50-249 and annual turnover less or equal to 50 million Euros 10-50
Small 10-49 and annual turnover less or equal to 10 million Euros 4-9
Micro 1-9 and annual turnover less or equal to 2 million Euros 1-3

According to the YMIT (2014) report, there are approximately 27,796 SMEs in Yemen, specifically in the
manufacturing sector, as indicated in table 2.

Table 2 SMEs in Yemen

SMEs in Yemen Items Percentage
Large 0.51
Medium 1.91
Enterprise
Small 19.15
Micro 78.43
Location Sana’a 18.06
 51 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68

Taiz 13.93
Rest of the cities 68.01
Food products and beverage 43.75
Fabricated metal products 14.78
Type of Enterprises Non-metallic mineral products 11.02
Apparel products 10.80
Other (services, retail) 19.65

Additional data from the Yemen Ministry of Trade and Industry pertaining to SMEs is sourced from the 2017
guide for small and medium-sized manufacturing firms. The guide identifies a total of 3,048 SME manufacturers,
as presented in Table 3.

Table Error! No text of specified style in document. Demography of SMEs in Yemen

Number of Small Number of Medium
No. Governorate
Manufacturers Manufacturers
1 Sana’a 1450 151
2 Aden 336 28
3 Hadramout 450 64
4 Taiz 669 84
5 Dhamar 209 12
Total 2709 339
Source: Yemeni Ministry of Industry and Trade, (2017)

2.2 SMEs Organization Performance

Organizational performance refers to the assessment and evaluation of an organization's overall effectiveness in
achieving its goals and objectives. It encompasses various dimensions, including financial performance,
operational efficiency, productivity, customer satisfaction, employee engagement, innovation, and market share.
Evaluating organizational performance provides insights into how well an organization is functioning and
whether it is successfully delivering value to its stakeholders.
Organizational performance refers to the evaluation of a company's market position and its ability to fulfil the
needs of its stakeholders (Hanaysha et al, 2022). It encompasses the extent to which the company achieves its
performance goals (primary measurements) and satisfies the requirements of its customers (secondary
measures) (Lee et al, 2022). Previously, organizational performance was often defined using financial
measurements such as profitability, return on assets (ROA), return on investments (ROI), and return on equity
(ROE). However, traditional performance measurement systems that heavily rely on financial metrics are
increasingly criticized for their short-term focus (Alshurideh et al, 2022).
Many scholars have adopted a more balanced approach to performance measurement, incorporating both
financial and non-financial indicators (Hanaysha et al, 2022). While financial performance is considered the goal
of any business as it reflects how effectively the company utilizes its assets to generate income (Lee et al, 2022),
non-financial performance metrics relate to a company's long-term operational objectives or future performance
indicators that cannot be adequately captured by current financial measures (Alshurideh et al, 2022). The
literature on the growth of small and medium-sized enterprises (SMEs) extensively explores the factors that
contribute to their success or hinder their performance and how their success contributes to economic
development. Previous research has identified a wide range of factors influencing enterprise success or failure,
categorized as internal and external aspects. External determinants encompass macroeconomic factors, political
and institutional dynamics, market opportunities, and socio-cultural elements, while internal factors include
managerial skills, human capital, financial management, demographics, and organizational innovation
(Alshurideh et al, 2022). Numerous studies on SMEs in developing countries have focused on identifying specific
factors that impact their performance and sustainability (Hanaysha et al, 2022). The significance of these factors
varies depending on the country. Recent research by Vyas et al. (2015) highlighted critical success factors for SMEs
operating in the banking industry in India, including supportive organizational factors, responsive services, target-
based marketing, SME banking policy and model, and improved customer service. Overall, the performance of
small and medium-sized businesses has gained significant attention in the literature, with researchers
emphasizing the need for effective management practices (Lee et al, 2022).
 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68 52

3. Affecting SMEs Performance

This study categorizes the factors influencing the performance of Manufacturing Small and Medium-sized
Enterprises (SMEs) into the non-financial group, specifying training, innovation, market orientation, and human
capital as the key factors.

3.1 Training
Training is a key element for organizational success and gaining a competitive edge (Abdelwahed and Mufti,
2023). Its role in enhancing competencies and improving organizational efficiency is widely acknowledged
(Suryadi et al., 2019; Yadav and Mathew, 2023). Investing in training becomes crucial for achieving organizational
goals and improving overall effectiveness. Tailoring training programs to specific needs and objectives can
maximized its impact (Ramya, 2016). Engagement methods like coaching and mentoring actively involve
employees, contributing to enhanced organizational performance (Alshahrani et al., 2023). Proper training aligns
employees' actions with organizational goals, exerting a positive influence on performance (Alshahrani et al.,
2023). It plays a crucial role in addressing challenges, increasing efficiency, and driving company productivity
(Suryadi et al., 2019; Abdelwahed and Mufti, 2023). Effective training design, aligned with organizational
objectives, stands out as a key determinant of success (Alshahrani et al., 2023; Samwel, 2018). In summary,
training significantly enhances employee performance, leading to increased productivity, improved quality, and
cost reduction (Khair, 2018). For SMEs, leveraging training becomes a strategic tool to meet market demands and
acquire essential competencies for growth (Short & Gray, 2018; Alshahrani et al., 2023).

3.2 Innovation
Innovation is the creation and implementation of new ideas, products, services, or processes, plays a crucial role
in organizational performance. It involves creative thinking, research, and development to address challenges,
seize opportunities, and drive progress. Innovation enhances efficiency, customer satisfaction, and profitability,
serving as a catalyst for organizational transformation and differentiation (Abdel Fattah & Daoudi, 2017).
Innovation is essential for companies to survive and succeed in a dynamic business landscape, contributing to
economic and social advancements (Gebremichael & Tekle, 2020).
Impact of innovation on company performance is influenced by factors such as company size and human
capital (Ukpabio et al., 2018; AlQershi, 2020). In the automotive industry, a positive relationship has been
observed between innovation and organizational performance (Atalay, Anafarta & Sarvan, 2013; Hadid & Naima,
2016). Small and medium-sized enterprises (SMEs) should emphasize strategic innovation to gain competitive
advantages (AlQershi, Abas, & Mokhtar, 2019). Innovation in internal processes enhances efficiency and reduces
costs (Beltramino, García-Perez-de-Lema, & Valdez-Juárez, 2020). Innovation positively influences job
performance, making it a key strategy for growth and survival in competitive business environments (Ukpabio &
Siyanbola, 2017). The adoption and successful utilization of innovation in companies are influenced by various
factors, such as robotic systems and flexible manufacturing systems (Jandab, Ali, Abdulsamad, & Al-Sharif, 2019).
Innovation encompasses various types, including technological and non-technological innovations. Product
innovation, process innovation, organizational innovation, and marketing innovation are recognized formulations
of innovation. Embracing innovation is crucial for organizations to adapt to a changing business world, avoid
market failure, and improve performance (Jundub, Ali, & Al-Sharif, 2019). Ultimately, innovation serves as a
fundamental driver of progress and success in organizations and societies, addressing social, economic, and
environmental challenges while offering opportunities for improvement (ESCWA, 2018).

3.3 Market Orientation

As asserted by Abdullah (2017), market orientation involves the effective execution of marketing strategies
aligned with customer needs, aiming for superior performance through the creation and maintenance of customer
value (Bin Aliouche & Tawfiq, 2018). It involves a comprehensive understanding of market requirements, a focus
on customer value, and responsiveness to market information (Udriyah, Tham, & Azam, 2019). Market orientation
cultivates a customer-centric culture, offering guidelines for organizational development (Laukkanen et al., 2015),
and strengthens the customer-provider relationship, reflecting the organization's culture and shared values (Bin
Aliouche & Tawfiq, 2018). Key dimensions of market orientation include customer orientation, competitor
monitoring, and inter-departmental coordination. Particularly impactful for SMEs, market orientation
significantly contributes to performance and competitive advantage (Harjadi, Fatmasari, & Nurhasanah, 2020).
Encouraging for governmental and policymaker support in implementing market orientation strategies for SMEs,
Alhakimi & Mahmoud (2020) highlight its positive influence on marketing performance and its crucial role in
adapting to a changing environment. Continuous enhancement of market orientation proves instrumental in
improving SME performance.
 53 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68

3.4 Human Capital

Human capital plays a significant role in influencing success, efficiency, and overall performance (Brahimi, 2019).
It encompasses the collective knowledge, skills, and abilities of individuals within an organization (Dar & Mishra,
2019; Lin et al., 2017). The development of human capital through internal growth and strategic external
recruitment not only enhances managerial capabilities but also fosters innovation and competitive advantage
(Odhon'g & Omolo, 2015; Vixathep et al., 2017). While the relationship between human capital and organizational
performance needs further exploration, especially in culturally diverse regions like the Middle East (AlQershi,
Abas & Mokhtar, 2020), the significance of enhancing human capital in SMEs cannot be overstated. SMEs is
essential for economic development, benefit from strategic initiatives in areas such as international marketing
and customer service (Tjahjadi et al., 2020). Empowering employees and cultivating a supportive work
environment are key factors contributing to increased human capital and improved company performance (Ata
Allah, 2018). The positive influence of human capital extends to innovation, competitiveness, and job
performance, particularly within specific industries (Samagaio & Rodrigues, 2016; Rahim & Kamaluddin, 2017;
AlQershi, Abas, & Mokhtar, 2019; Gebremichael & Tekle, 2020). This study endeavours to explore the complicated
relationship between human capital and SME performance in Yemen.

4. Research Conceptual Model

The conceptual model for this study was developed based on the Resource-Based View (RBV) theory. The theory
suggests that a company can outperform competitors by effectively utilizing their resources and skills, leading to
improved work efficiency. Key elements of resources include human capital, innovation, training, and market
orientation (Chatterjee et al, 2023). Unique and difficult-to-imitate resources contribute to sustainable
competitive advantage (Nayak et al, 2023), and developing human capital through training, innovation, and
market orientation enhances SMEs' competitive advantage and job efficiency. Improving firm efficiency is linked
to internal processes, and firms leverage their distinct capabilities to enhance organizational effectiveness (Kosiol
et al, 2023). Resources can be considered both tangible which are financial and physical assets and intangible
which are intellectual capital, innovation, training, human capital (Chatterjee et al, 2023).
Training is an ongoing process designed to equip individuals with valuable skills, knowledge, and insights,
enabling proficient performance of practical tasks. It represents a continuous commitment to enhancing
employees' abilities and effectiveness (Hooper, 2016). Employees who undergo comprehensive training possess
the capability to effectively share their talents and experiences, leveraging their creativity to augment
organizational productivity (Elnaga & Imran, 2013). Research indicates that training generally elevates employee
motivation and enhances their efficiency (Githinji, 2014). Further, increased training correlates with heightened
job enthusiasm, positively influencing job outcomes (Amos & Natamba, 2015). According to Manzoor et al. (2019),
job training serves as a learning process that not only enhances employees' skills and enthusiasm but also
increases awareness and sharpens capabilities, ultimately resulting in improved employee efficiency. Drawing
from the reviewed literature, the following hypothesis is suggested:

H1: training has a positive relationship with SMEs performance.

Organizational innovation as defined by Oslo Manual (OECD, 2005), involves the integration of novel concepts
to enhance products and the incorporation of fresh organizational processes or approaches. This innovation,
spanning both technological and non-technological realms, encapsulates a diverse spectrum of organizational
advancements (Donate & de Pablo, 2015). Nevertheless, existing research has predominantly concentrated on a
traditional perspective of organizational innovation (Brettel & Cleven, 2011). The adoption of organizational
innovation significantly shapes the execution of business strategies by influencing employee roles, establishing
internal and external decision-making processes (Le Bas, Mothe, & Nguyen-Thi, 2015), and delineating
relationships with other organizations. Empirical evidence indicates that organizations failing to embrace
innovation in their operations exhibit lower descriptive capacity and organizational performance compared to
their innovative counterparts (Armbruster et al., 2008). Consequently, the following hypothesis is proposed:

H2: innovation has a positive relationship with SMEs performance.

Market orientation forms the bedrock of marketing and strategic planning, guiding a company's endeavours
towards delivering exceptional value to customers. Empirical findings indicate that market orientation exerts a
positive influence on business performance across diverse contexts characterized by varying levels of market
volatility, technological disruption, and competitive pressure (Joensuu-Salo et al., 2018). Market orientation, as
highlighted by Verhoef et al. (2011), can have a direct or indirect impact on market success. Moreover, the nexus
between customer orientation and job performance proves essential in enhancing job effectiveness across both
large and small businesses (Spillan et al., 2013). Considering these insights, the following hypothesis is suggested:
 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68 54

H3: Market orientation has a positive relationship with SMEs performance.

Human capital is crucial for elevating job efficiency within organizations, comprising a spectrum of resources
like expertise, experience, and capabilities that directly impact the firm's performance, including its profitability
(Samagaio & Rodrigues, 2016). The significance of human capital has grown markedly, exerting a substantial
influence on job performance across both large corporations and small businesses (Felcio et al., 2014). In the
context of SMEs businesses, human capital plays a vital role in growth and development, emerging as a key driver
of organizational success and contributing to heightened efficiency in competitive markets (Danso et al., 2016;
Capelleras et al., 2019). The merger of complementary skills, such as professional education, commercial
experience, and managerial expertise, allows companies to augment their overall efficiency. Numerous studies
emphasize the positive correlation between human capital and a company's profitability, growth, and success,
making a significant contribution to the enhancement of job performance (Chen & Chang, 2013). Therefore, the
following hypothesis is proposed:

H4: There is a positive correlation between human capital and job performance in SMEs.
Hence the study’s conceptual model considered the non-financial factors which are human capital, innovation,
training, and market orientation affecting or impacting the SMEs performance as figure 1.

Fig. 1 Conceptual model

In Figure 1, the graphical representation illustrates the interconnections among four key factors—human
capital, innovation, training, and market orientation—serving as independent constructs influencing the
performance of SMEs, the dependent construct. Within the training construct, there are five contributing factors,
while both the innovation and market orientation constructs encompass five factors each. The human capital
construct comprises nine factors. Additionally, SMEs Performance is described through ten distinct attributes.

5. Data Collection
Given the unstable conditions in Yemen, the population of 3,048 manufacturers, as identified by the Yemen
Ministry of Trade and Industry in the 2017 guide for small and medium-sized manufacturing firms (Table 3.1),
serves as the basis for determining the sample size. Following the guidelines by Krejcie and Morgan cited in
Aseminachin (2023), a minimum sample size of 341 participants is deemed necessary for robust results in
Structural Equation Modelling (SEM) research. Consequently, the study aimed to secure at least 341 responses.
Anticipating potential non-response or inaccuracies, and acknowledging the typically low response rate
associated with survey methods, a total of 500 questionnaires were distributed to managers. The research centres
on the perspectives of managers working in SMEs situated in Yemen's cities, including Sana'a, Aden, Hadramout,
Taiz, and Dhamar. The selection of managers as respondents is predicated on their extensive experience and
expertise in evaluating factors contributing to job performance enhancement in SMEs. The choice of these five
governorates is strategic, driven by the substantial concentration of SMEs in these cities and their representation
of diverse geographical regions across Yemen, encompassing the north, central, and south.
To collect data, a questionnaire was employed, targeting managers of SMEs in Sana'a, Aden, Hadramout, Taiz,
and Dhamar in Yemen. This decision was rooted in the managers' comprehensive experience and ability to assess
factors contributing to the improvement of SMEs' job performance. The selection of these five governorates was
influenced by the significant concentration of SMEs in these cities, along with their diverse geographical locations
spanning the northern, central, and southern regions of Yemen.
 55 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68

6. Modelling
The modelling of this study used Analysis of Moment Structures (AMOS). AMOS provides a user-friendly graphical
interface for building, estimating, and evaluating structural equation models. It allows researchers to specify and
test complex theoretical models that involve latent variables and observed variables. AMOS is particularly known
for its capabilities in conducting both Confirmatory Factor Analysis (CFA) and path analysis within the framework
of Structural Equation Modelling (SEM). CFA is used to assess and confirm the relationships between observed
variables and latent constructs. CFA helps in testing the hypothesized factor structure and determining the extent
to which the observed variables align with the underlying constructs. While, Path Analysis, where it examines the
relationships (paths) among the latent constructs. This includes testing the direct and indirect relationships
between variables and assessing how well the overall model fits the observed data. Path analysis allows for the
examination of causal relationships and helps in understanding the complex interplay between variables (Awang,
2015; Hair et al., 2011; Hooper, 2008).

6.1 Fitness Index

According to Field (2009), the index of fitness is a measure of how well a model fits the data it was constructed
from. It evaluates the accuracy of the model's predictions by comparing them to the observed data. In SEM,
achieving the objective effectively requires the model to meet a set of suggested acceptable values for multiple
indices that apply to both the measurement and structural models. However, the suggested acceptable values for
these indices have been subject to challenges by experts in the SEM field. Table 4 provides a reference for meeting
the SEM target effectively.

Table Error! No text of specified style in document. The Criteria of Successfully Achieving the Goal in SEMAwang
(2015); Cangure & Ercan (2015)
Criteria Category Acceptance level values Applicability
Factor loading for items ≥ 0.6 Measurement model +structural model
Correlation coefficient ≤ 0.85 Measurement model
Standardized beta ≤ 0.85 Structural model
Significance level ≤ 0.05 Structural model
Average Variance Extracted (AVE). ≥ 0.5 Measurement model
Construct Reliability (CR) ≥0.6 Measurement model
Modification Index ≤15 Measurement model +structural model

As stated by Hair et al. (2010), fitness indices are measures that assess the extent to which a specified model
reproduces the covariance matrix among the indicator variables. To ensure an accurate evaluation of the model's
performance, Hair et al. (2006) and Hair et al. (2010) recommend the use of at least three fitness indices, with at
least one index from each of the three categories: absolute fit, incremental fit, and parsimonious fit. Table 5
presents information regarding the categories of fitness indices and their accepted values, drawing from various
sources. This table provides details on the specific fitness indices adopted in this research along with their
acceptable values.

Table Error! No text of specified style in document. The Criteria of Fitness Indices in SEM (Ramayah & Lee
(2012); Hair et al. (2010)
Recommended
Index Fitness Indices Applicability
value
Goodness-of-Fit Index (GFI) ≥ 0.8
Absolute fit Root Mean Square Error of Approximation
≤ 0.08
(REMSEA).
Measurement
Tucker-Lewis Index (TLI) ≥ 0.9
model
Incremental fit Comparative Fit Index (CFI) ≥ 0.9
+
Normed Fit Index (NFI) ≥ 0.8 Structural model
Parsimonious
Chi-Square/Degree of Freedom (ChiSq/df,) ≤ 3.0
fit
 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68 56

6.2 Confirmatory Factor Analysis (CFA)

Confirmatory Factor Analysis (CFA) is a reliable method used to assess the agreement between observed variables
and the researcher's perspective of a construct (Awang, 2014). CFA has gained prominence as a means to establish
construct validity, surpassing older techniques like exploratory factor analysis (EFA) (Awang, 2015). In this
research, a combination of SEM and CFA was employed following established steps recommended by experts
(Awang, 2015; Hair et al., 2011; Hooper, 2008). These steps include model specification, identification, parameter
estimation, fitness index measurement, and model re-specification. The validity of the measurement model was
assessed prior to evaluating the structural model, using maximum likelihood estimation. Fitness indices and
acceptance criteria for assessing the models' fitness are presented in Table 4.12. Model re-specification was
performed, guided by modification indices (MI), to identify specification errors. The subsequent sections provide
a comprehensive evaluation of the measurement model for each latent construct, showcasing the initial models,
fitness indices, modification indices, and final models. It is important to note that the research has been completed,
and the results and conclusions are presented in subsequent sections.

6.2.1 CFA for SMEs Performance

The measurement model for SMEs performance, illustrating the relationship between response items and their
underlying constructs, is graphically presented. Confirmatory Factor Analysis (CFA) was conducted to assess the
model's fit to the data, and the results are depicted in Figure 2.
Fitness indices play a crucial role in evaluating construct validity, ensuring that response items effectively
measure the intended constructs. In CFA, if the fitness indices fall below the required level, a stepwise process
involves removing items with low factor loadings from each construct until the desired fitness is achieved.
Conversely, if the model is deemed fit but includes items with low factor loadings, those items may be retained
unchanged, as they do not significantly impact the overall fitness of the model.

Fig. Error! No text of specified style in document. The Measurement Model for SMEs Performance
The SMEs Performance measurement model initially comprised ten indicator items; however, due to low
factor loadings, four of them (Q1-Q4) were excluded. The final measurement model for the SMEs Performance
construct adhered to all recommended cutoff values by fitness indexes (Awang, 2014). This process involved
ensuring that all item factor loadings surpassed 0.5 and scrutinizing Modification Indices (MI). Employing the
methodologies outlined by Byrne (2013) and Hair et al. (2006), high MI values indicating significant covariance
and regression weights were used to identify problematic items. Consequently, items Q1-Q4 were removed.
Subsequent to this refinement, the measurement model underwent a re-run, and the conclusive CFA model,
depicted in Figure 3, includes the remaining six indicator items.
 57 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68

Fig. Error! No text of specified style in document. Final Measurement Model for SMEs Performance

The fitness index values generated in Figure 3 of the final measurement model for SMEs' performance are
presented in the accompanying table 6.

Table 6 Results of fitness

Fitness Indices Threshold value Generated value Fitness Achievement
ChiSq/df ≤ 3.0 2.904 Achieved
TLI ≥ 0.9 0.966 Achieved
CFI ≥ 0.9 0.984 Achieved
NFI ≥ 0.8 0.976 Achieved
GFI ≥ 0.8 0.977 Achieved
REMSEA ≤ 0.08 0.08 Achieved

Table 6 shows that all the fitness indices for the final measurement model for SMEs performance have
achieved the fitness threshold values which means that the model is fit.

6.2.2 CFA for Training

Confirmatory Factor Analysis was performed on the Training construct's measurement model, and the results are
illustrated in Figure 4. The model, consisting of five indicator items (Q11-Q15), reveals the fitness indices of the
Training construct. Further scrutiny of the model for additional fitness criteria, such as factor loading and squared
multiple correlation, affirms that all these factors meet the necessary threshold levels of ≥ 0.50 for factor loading
and ≥ 0.20 for squared multiple correlation.

Fig. Error! No text of specified style in document. Measurement Model for Training
 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68 58

The fitness index values generated in Figure 4 of the initial measurement model for training are presented in
the accompanying table 7

Table 7 results of fitness

Fitness Indices Threshold value Generated value Fitness Achievement
ChiSq/df ≤ 3.0 0.742 Achieved
TLI ≥ 0.9 1.005 Achieved
CFI ≥ 0.9 1.000 Achieved
NFI ≥ 0.8 0.995 Achieved
GFI ≥ 0.8 0.996 Achieved
REMSEA ≤ 0.08 0.000 Achieved

After evaluating the fitness indices in table 7 for the Training model, it is evident that all recommended values,
including NFI, TLI, GFI, RMESA, and Chisq/def, have been met. This confirms that the final measurement model
for the Training construct fulfils the necessary criteria for a good fit. As per the goodness-of-fit indices
recommended by Awang (2014), the Training model satisfies all acceptable cut-off values.

6.2.3 CFA for Innovation

The results of the Confirmatory Factor Analysis (CFA) for the Innovation measurement model are displayed in
Figure 5, showcasing factor loadings, squared multiple correlations (R2), and fitness indices for each of the five
indicator items in the same order.

Fig. 5 Initial Measurement Model for Innovation

The fitness index values generated in Figure 5 of the initial measurement model for innovation construct are
presented in the accompanying table 8.

Table 8 Results of fitness

Fitness Indices Threshold value Generated value Fitness Achievement
ChiSq/df ≤ 3.0 2.915 Achieved
TLI ≥ 0.9 0.970 Achieved
CFI ≥ 0.9 0.988 Achieved
NFI ≥ 0.8 0.982 Achieved
GFI ≥ 0.8 0.984 Achieved
REMSEA ≤ 0.08 0.080 Achieved

Upon reviewing the fitness criteria of the Innovation model in Table 8, including factors such as factor loading
and squared multiple correlation, it is evident that all factor loadings and squared multiple correlations meet the
necessary thresholds of ≥ 0.50 and ≥ 0.20, respectively. In summary, only five items from the Innovation construct
 59 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68

are utilized in the structural equation modelling process. These five items have met the required standards,
affirming their suitability for analysis.

6.2.4 CFA for Market Orientation

The visual depiction of the Market Orientation measurement model illustrates the connection between response
items and the underlying construct. Utilizing Confirmatory Factor Analysis (CFA), the factor loading and fitness
indexes of the nine indicators in the model were assessed. Upon additional scrutiny of the model using alternative
fitness criteria, it was determined that all factor loadings and squared multiple correlations surpassed the
necessary thresholds of at least 0.50 and 0.20, respectively. Figure 6 presents all the indicators in the Market
Orientation measurement model.

Fig. Error! No text of specified style in document. Measurement Model for Market Orientation

The fitness index values generated in Figure 6 of the initial measurement model for market orientation
construct are presented in the accompanying table 9.

Table 9 Results of fitness

Fitness Indices Threshold value Generated value Fitness Achievement
ChiSq/df ≤ 3.0 1.630 Achieved
TLI ≥ 0.9 0.990 Achieved
CFI ≥ 0.9 0.997 Achieved
NFI ≥ 0.8 0.992 Achieved
GFI ≥ 0.8 0.993 Achieved
REMSEA ≤ 0.08 0.047 Achieved

Table 9 demonstrates that all fitness indices for the market orientation construct's measurement model have
successfully reached the fitness threshold values, indicating a well-fitted model.

6.2.5 CFA for Human Capital

The results of the Confirmatory Factor Analysis (CFA) for the Human Capital measurement model, comprising
factor loadings, squared multiple correlations (R2), and fitness indices, are presented in the same order. The
Human Capital measurement model, consisting of eleven indicator items, is visually depicted in Figure 7, which
also provides the fitness indices for the Human Capital construct. Upon closer scrutiny of the model, including
factor loadings and squared multiple correlations, it was established that all factor loadings and squared multiple
correlations met the required thresholds.
 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68 60

Fig. Error! No text of specified style in document. The Measurement Model for Human Capital

Upon reviewing the fitness indices of the Human Capital model in comparison to the recommended values,
none of the fit indices met the specified criteria. The researcher initially examined the factor loadings of the items,
ensuring they exceeded 0.5. Subsequently, Modification Indices (MI) were scrutinized, resulting in the removal of
Q32-Q34 due to low factor loadings. After addressing these problematic items, the measurement model
underwent a recommended re-run. The final CFA model is depicted in Figure 8.

Fig. 8 Final Measurement Model for Human Capital

The fitness index values generated in Figure 8 of the initial measurement model for Human Capital construct
are presented in the accompanying table 10.

Table 10 Results of fitness

Fitness Indices Threshold value Generated value Fitness Achievement
ChiSq/df ≤ 3.0 2.610 Achieved
TLI ≥ 0.9 0.973 Achieved
CFI ≥ 0.9 0.989 Achieved
NFI ≥ 0.8 0.983 Achieved
GFI ≥ 0.8 0.982 Achieved
REMSEA ≤ 0.08 0.076 Achieved

Upon scrutinizing the fitness indices in comparison to the final measurement model values in Table 10, it was
determined that all fit indices for the Human Capital model met the recommended values. Subsequently, the model
was re-specified until these recommended values were attained. Ultimately, the final measurement model for the
 61 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68

Human Capital construct successfully adhered to all acceptable cut-off values as recommended in the goodness-
of-fit indexes (Awang, 2014).

6.2.6 CFA for All Constructs

A Confirmatory Factor Analysis (CFA) was conducted on all five measurement models, including SMEs
Performance, human capital, innovation, training, and market orientation. The examination of modification
indices highlighted significant covariance and regression weights, prompting the identification of problematic
items. Subsequently, these identified items were removed, and a subsequent rerun of the measurement model
was executed. The final integrated CFA models are illustrated in Figure 9.

` Fig. Error! No text of specified style in document. Final CFA Model

The final constructed integrated measurement model illustrated in Figure 9 demonstrated a favourable fit, as
indicated by the indices. TLI and CFI scores surpassed 0.90, while NFI and GFI exceeded 0.80, signifying a high
level of goodness of fit. It is crucial to consider the factor loading size, as recommended by Hair et al. (2010), during
result analysis. The generated fitness values are presented in table 11.

Table Error! No text of specified style in document. Fitness Indexes for All Constructs Simultaneously
(Initial CFA Model)
Index Level of Acceptance IndexValue Fitness Achievement
Chisq/df Chisq/df ≤ 3 2.061 Achieved
TLI TLI ≥ 0.9 means satisfactory 0.916 Achieved
CFI CFI ≥ 0.9 means satisfactory fit 0.927 Achieved
NFI NFI ≥ 0.80 suggests a good fit 0.869 Achieved
GFI GFI ≥0.80 suggests a good fit 0.868 Achieved
RMSEA RMSEA ≤ 0.08 means mediocrefit. 0.061 Achieved
Model is accepted

Table 11 indicated that all indices for the measurement model met the recommended values, signifying the
successful fulfilment of all Confirmatory Factor Analysis (CFA) fitness criteria by the integrated measurement
model.

6.2.7 Assessment of Reliability and Validity of the Measurement Model

In this study, the assessment of construct reliability and validity involved a comprehensive examination of key
psychometric properties. Convergent validity was explored to determine the extent to which a construct
correlates with other theoretically related constructs. Discriminant validity, on the other hand, aimed to assess
the distinctiveness of a construct from unrelated counterparts. The Average Variance Extracted (AVE) was utilized
for evaluating convergent validity, with values of 0.5 or higher indicating satisfactory results. To establish
 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68 62

discriminant validity, the AVE estimates for any two factors were compared to ensure they exceeded the squared
correlation coefficient between them.
In tandem with validity assessments, construct reliability was scrutinized using the construct reliability
measure (CR). The CR values were examined to ensure they met or exceeded the recommended threshold of 0.60,
indicating the reliability of the measurement model (Fornell and Larcker,1981; Hair et al. 2010). The reliability
construct measures, including CR and AVE, are presented in Table 12, providing valuable insights into the
reliability and validity of the study’s measurement model.

Table 12 Results of CR and AVE

Construct Reliability Convergent Validity
Construct
CR (≥ 0.6) AVE (≥ 0.5)
SMEs Performance 0.736 0.555
Training 0.713 0.505
Innovation 0.610 0.502
Market Orientation 0.872 0.536
Human Capital 0.800 0.613

For discriminant validity, the generated values are presented in Table 13. The bolded values along the
diagonal represent the square root of the Average Variance Extracted (AVE), while the remaining values indicate
the correlations between the respective constructs. Discriminant validity is confirmed when the diagonal value
exceeds the values in its corresponding row and column, as outlined by Fornell and Larcker (1981).

Table Error! No text of specified style in document. Discriminant validity values

Market Human
Constructs Performance Training Innovation
Orientation Capital
SMEs Performance (0.655)
Training 0.122 (0.797)
Innovation 0.291 0.295 (0.754)
Market Orientation 0.271 0.098 0.218 (0.712)
Human Capital 0.182 0.085 0.154 0.152 (0.744)

According to the findings in Table 13, all constructs in this study successfully meet the criteria for convergent
validity, attaining an acceptable level. Consequently, the reliability and validity of the research constructs are
deemed satisfactory.

6.3 Path Analysis

Upon confirming the uni-dimensionality, reliability, and validity of the research constructs, the analytical
framework advanced to integrate all constructs into a structural equation model using Analysis of Moment
Structure (AMOS). The endogenous variable, SMEs Performance, along with exogenous variables—Human capital,
innovation, training, and market orientation—were systematically organized within the model. The hypothesized
relationships were represented by directional arrows, as depicted in Figure 10. The final structural model which
shows perfect compliance with the goodness-of-fitness for the Model.
 63 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68

Fig. Error! No text of specified style in document. Structural Model

Nevertheless, the structural model of figure 10 was utilized to scrutinize the multidirectional relationships
among all the research constructs. The subsequent step encompassed the evaluation of fitness indices for the
structural measurement models, outlined in Table 14.

Table Error! No text of specified style in document.14 Fitness Indexes for the Structural Model
Fitness Indexes Acceptance Level Generated Index Value Comments
Chisq/df Chisq/df ≤ 3 2.151 Fitness Indexes achieved
TLI TLI ≥ 0.9 0.908 Fitness Indexes achieved
CFI CFI ≥ 0.9 0.920 Fitness Indexes achieved
NFI NFI ≥ 0.80 0.861 Fitness Indexes achieved
GFI GFI ≥ 0.80 0.859 Fitness Indexes achieved
RMSEA RMSEA ≤ 0.08 0.064 Fitness Indexes achieved

These indices in table 14 served to assess the goodness-of-fit between the model and the observed data. The
acquired fitness indices indicated that the model's fit reached an acceptable level, signifying a reasonable
alignment between the hypothesized relationships and the collected data.
After establishing that the structural model of the research achieved satisfactory fitness with the collected
data, meeting the requirements for model adequacy, the hypotheses for each path are explained upon. This
information is presented in Table 15, which outlines the results of each specific path in the structural
measurement model, providing insight into the anticipated outcomes.

Table 15 Hypothesis results of the path modelling

Hypothesis Path p-value Beta coefficient Status
H1 SMEs Performance <--- Training . 001 0.30 Supported
H2 SMEs Performance <--- Innovation .000 0.90 Supported
H3 SMEs Performance <--- Market Orientation .049 0.10 Supported
H4 SMEs Performance <--- Human Capital . 024 0.20 Supported

Table 15 summarised the hypothesised outcome of each respected path in the structural model. H1: Training
has significant positive relationship with SMEs' performance which is consistent with previous research that
emphasizes the importance of training and development programs for enhancing SMEs' performance (Suryadi,
Komar, & Riswanto, 2019; Abdelwahed and Mufti, 2023; Alshahrani et al, 2023). This finding provides support to
the human capital theory by emphasising the importance of investing in employees' knowledge and abilities to
 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68 64

improve organisational performance. The strong positive relationship discovered between training initiatives and
SMEs' performance highlights the importance of SMEs prioritising investments in employee training programmes,
as such endeavours can improve productivity, efficiency, and innovation capabilities, resulting in increased
profitability and growth. Furthermore, the findings suggest that policymakers develop tailored training measures
for SMEs, such as low-cost programmes, mentorship, and advisory services. Overall, the positive association
between training and SME performance highlights the critical importance of training in improving the
competitiveness and sustainability of SMEs, prompting both SMEs and policymakers to actively invest in and
support training programmes.
H2: Innovation is positively related to manufacturing SMEs" indicates that there is a significant correlation
between innovation and small and medium-sized enterprises (SMEs) operating in the manufacturing industry. This
finding is consistent with previous research that has identified innovation as a critical driver of development and
success in the manufacturing industry (Ukpabio et al., 2018; AlQershi, 2020; Alhakimi & Mahmoud, 2020; Singh &
Hanafi, 2020). The beneficial relationship between innovation and manufacturing SMEs has major policy and
practice consequences. Policymakers may use this knowledge to develop measures that encourage innovation and
foster an environment conducive to the expansion of SMEs in the manufacturing sector. Similarly, SME owners
and managers can apply this knowledge to create their business strategies, emphasising innovation in their
operational efforts.
.H3: Market Orientation has a positive relationship with SMEs’ performance suggests that SMEs that are more
market-oriented tend to perform better than those that are less market-oriented. Market orientation involves a
proactive approach to understanding and satisfying customers' needs, considering competitors, and navigating
market forces, ultimately leading to enhanced sales and profitability. Small and medium-sized enterprises (SMEs),
known for their agility and innovation, may encounter challenges in competing with larger counterparts,
emphasizing the importance of adopting a market-oriented strategy for competitiveness. This finding aligns with
prior research indicating that a market-oriented approach leads to enhanced financial performance, increased
customer satisfaction, and greater innovation for SMEs (Udriyah et al., 2019; Harjadi et al., 2020; Alhakimi &
Mahmoud, 2020). In conclusion, the positive relationship between market orientation and SME performance,
substantiated by statistical evidence and previous research, underscores the critical importance of SMEs
prioritizing customer-centric strategies for success in a competitive business environment.
H4: There is a positive relationship between human capital and the SMEs’ performance in the manufacturing
sector. In SMEs manufacturing sector, the significance of human capital is particularly pronounced, given the
limited resources of these firms and their substantial reliance on the expertise and productivity of their workforce.
The discovery that human capital positively influences SME performance in Yemen's manufacturing sector is
consistent with findings in diverse contexts. Numerous studies, including those by Odhon'g & Omolo (2015),
Vixathep et al. (2017), and Al Qershi, Abas, & Mokhtar (2019), have highlighted the advantageous impact of
investing in employee training and development on organizational performance, emphasizing that enterprises
with elevated levels of human capital tend to exhibit greater innovation and adaptability. The study's outcomes
carry significant implications for policymakers and managers in Yemen's manufacturing sector, advocating for
strategic investments in human capital development to enhance SME performance. This involves offering training
opportunities, fostering employee development, and securing skilled personnel. Overall, the study provides
valuable insights into the connection between human capital and SME performance in Yemen's manufacturing
sector, underscoring the pivotal role of investing in this critical resource.

7. Conclusion
This study exhibits the construction of a structural relationship model of Non-Financial Factors that include
innovation, training, human capital, and market orientation on the performance of Yemen's Small Medium
Enterprises (SMEs). The modelling was done using the AMOS-SEM software. Structural Equation Modelling (SEM),
route analysis, and confirmatory factor analysis are all performed using the software. It is well-known for its visual
approach, which enables users to graphically build models with basic sketching tools and analysts to participate
in intricate statistical modelling. The modelling examines the specific effects of these factors and discloses key
contributors to the success or failure of SMEs. Data used for modelling was collected from 350 valid responses of
employees in the Yemeni manufacturing SME. The findings from the modelling highlight the dominant significance
of innovation, as proved by its highest beta coefficient of 0.90, signifying its profound impact on SME performance.
Following closely is training, with a coefficient of 0.3, further establishing its crucial role in influencing
performance outcomes. Ultimately, this research concludes that the four factors—human capital, innovation,
training, and market orientation—exhibit a statistically significant relationship with SME performance within
manufacturing sector. The inferences of these findings are of paramount importance to policymakers and
practitioners as it offers actionable insights for enhancing SME performance and driving economic growth within
Yemen
 65 Int. J. of Sustainable Construction Engineering and Tech. Vol. 15 No. 1 (2024) p. 48-68

Acknowledgement
The authors express gratitude to UTHM for overseeing and disseminating this study.

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