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Despite the increasing relevance of entrepreneurial orientation (EO) for innovation performance in the context of small and medium enterprises (SMEs), few studies examine the complexity of the underlying mechanism that explains the relationship between EO and innovation performance. Drawing on the resource-based view (RBV) and signalling theory, we examine an organisation-level model to explain how SME EO predicts innovation performance through human resource management (HRM) practices and collective organisational engagement (COE). We used data collected from 186 human resource managers and 526 employees in SMEs. The results indicate that HRM practices and COE sequentially mediate the relationship between EO and innovation performance. To complement studies that identify an organisation's micro processes (i.e. employee behaviours as mediators between EO and innovation), this study highlights the need to examine macro processes occurring at the organisation level to account for the EO–innovation performance relationship. [ABSTRACT FROM AUTHOR]