<p>Innovation is a critical determinant to foster economic growth and maintain sustainable development. Small and medium-sized enterprises are considered as an essential component to drive innovation. The primary objective of this study to explore the influences of entrepreneurial orientation on innovation performance of SMEs, emphasizing the mediating role of absorptive capacity and the moderating influence of environmental uncertainty within context of resource-based view. Data were collected through a structured questionnaire administered to SMEs and 213 valid responses were received. The data were analyzed using partial least squares structural equation modeling with SmartPLS4. The findings reveal that entrepreneurial orientation has a positive influence on innovation performance of SMES through the partial mediation of absorptive capacity. However, environmental uncertainty does not moderate the relationship between absorptive capacity and innovation performance. This research extends the existing literature and advances the resource-based view through investigating the underlying mechanism. The study also provides insightful outcomes for entrepreneurs, industries and policymakers to achieve competitive advantage, establish economic growth and develop long-term sustainability. Conclusively, this study advances the current literature on sustainability, strategic and innovation management and provides insightful guidelines to the practitioners in fostering innovation within resource-constraint environment.</p>