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Purpose: The purpose of this paper is to examine the mediating effect of human capital on the relation between the strategic innovation and competitive advantage of SMEs in Yemen. Methodology/Approach: The PLS-SEM analysis is performed to test the hypotheses by using data collected from 238 SMEs in Yemen. The results support the hypotheses. Findings: The results of the PLS-SEM analysis are as follows: strategic innovation had a significant effects on SMEs’ competitive advantage; also human capital had a significant effects on SMEs’ competitive advantage; human capital mediated the effect of strategic innovation on competitive advantage; and strategic innovation had a positive and significant effect on human capital. Research Limitation/Implication: The population of the study was limited to manufacturing SMEs, so the results cannot be generalized to other types of industry such as services, whose structure and vision differ from those of manufacturing companies. Originality/Value of paper: The paper is one of the first to highlight human capital as a mediator between strategic innovation and competitive advantage of manufacturing SMEs in Yemen and the Middle East, describing a single study applied in the context of a developing country.

Strategic Innovation and Competitive Advantage of Manufacturing SMEs: The Mediating Role of Human Capital