AbstractS mal l and medium enterprises (SMEs) in developing economies nowadays experience s strong competitions both locally and at the global markets . Consequently, Hall and Wagner, (2012) demonstrated the needs for an analysis of specific s trategic capabilities required for sustainable development of small businesses . Despite the interest stimulated by the works of numerous scholars (Ma, 2004, Teece, 1992) , there have been limited researches that attempted to examine and demonstrated the factors influencing competitive advantage of SMEs i n developing economies . Devlin and Ennew, (1997) advocated t hat market driven competition arena and source of competitive advantage are easily recogniza ble for particular market . Th is study concep tualized six capabilities as strategic capabilities which can efficiently enhance SMEs competitive advantage at local an d international markets. The results from the comfirmatory factor analysis through Cronbachâ€™s alpha demonstrated the reliability of the items measuring; innovation capability, learning capability, managemnt capability, marketing capability, relational capa bility and technological capability as determinants of SMEs competitive advantage in developing economies.
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