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This paper investigates how knowledge creation process mediates the relationship between customer orientation and firm performance for small hotels in Malaysia. A survey was conducted to gather data for this study from 308 small hotel owners located in five tourism regions in Malaysia. The results show that i) customer orientation has a direct relationship with firm performance 2) a firm's customer orientation initiatives have an impact on firm's knowledge creation process that are dependent on the dynamic capabilities of their tourism entrepreneurs and 3) customer orientation displayed by small hotels is found to be partially mediated by the knowledge creation process and its impact on firm performance. This paper maintains that small hotels that display customer orientation are mostly dependent on their own resources instituted internally by their owners. However, firm performance improves if the firm dutifully builds its knowledge database from internal and external knowledge sources through socialization, externalization, combination and internalization processes. This study establishes the importance of customer orientation and knowledge creation, especially to those of as resource-based and dynamic capabilities respectively into renewed firm outcomes, to both academics and industry practitioners. This research findings are useful for tourism entrepreneurs, who are seeking to compete and achieve superior firm performance for effective business practices and enhancing return on investment.

The use of the resource-advantage theory by businesses has come to be a standard tool for forging business advantage over the past 30 years. However, the benefits of managerial orientation and the knowledge creation process may be context-specific as opposed to being common worldwide. In contrast to large organizations, small- and medium-sized businesses have a higher dependency on their internal resources. This article discusses the situation of converting owner-managers’ entrepreneurial orientation and brand orientation into superior business performance (BP) using the resource advantage-knowledge creation approach. It is found that owner-managers of Malaysian small and medium tourism accommodation businesses (SMTABs) are entrepreneurial but less brand-orientated. Yet a better result would arise when entrepreneurship and brand orientation are integrated to encourage a knowledge creation process that directly influences BP. This article suggests that SMTAB owner-managers should make more effort in honing their managerial orientation. The findings of this study can only be generalized to developing nations.