Previous literature showed mixed results about the impact of CEOs’ financial literacy
(CFL) on small and medium-sized enterprises’ (SMEs) innovation. This relationship can
be motivated by relevant variables, which are missing in the previous literature and
make a difference as mediators. In this sense, based on the theoretical framework
related to upper echelon theory and resource-based view, this study focuses on the
mediating effect of risk-taking attitude and management control systems (MCS) variables.
Empirical data from 310 SMEs gathered using a qualitative research questionnaire
are analyzed using structural equation modeling methodology. Specifically, estimations
are carried out considering the partial least square method. Findings show that MCS
and managers’ risk attitudes fully mediate the relationship between financial literacy
(FL) and innovation. Between these two mediating variables, the implementation of
MCS stands out because it also enables the mediating effect of CEOs’ risk-taking in the
CFL–technological innovation relationship. As the results do not support the significant
direct relationship between FL and risk attitude, they confirm an indirect effect through
MCS. Furthermore, based on the study findings, SMEs’ directors and owners, business
associations, and public authorities can improve SMEs’ technological innovation by
implementing training programs and policies to foster CFL. They can also acknowledge
the interdependency between organizational factors and individual characteristics to
enhance SMEs’ technological innovation.
