The study aims to explore the impact of tacit knowledge sharing (TKS) factors and its consequences in the form of technological innovation capabilities (TICs) within Pakistani software small–medium enterprises (SSMEs).

Drawing upon the social exchange theory (SET), the study used a quantitative approach and structural equation modeling (SEM) to test hypotheses with 220 valid data collected from 23 Pakistani software SSMEs.

The peer influence (PI) has positive and significant effect on collaborative culture (CC), willingness to share tacit knowledge (WSTK) and TICs. Organizational trust (OT) has a positive and significant impact on CC and TIC. Whereas, CC possessed positive and significant effect on WSTK and insignificant on TIC. Furthermore, WSTK has positive and significant effect on TIC. Finally, WSTK partially mediates the relationship between PI and TIC whereas WSTK fully mediates the relationship between CC and TIC.

The study enriches the research on knowledge sharing and TIC. This research investigates the precursors of tacit knowledge-sharing willingness and their consequences in software SMEs; future studies need to examine tacit knowledge-seeking willingness and its consequences not only in software enterprises but also in other industrial sectors. Besides, it needs to evaluate types of innovative capabilities in software SMEs.

The study suggested that the practitioners need to strengthen TKS in the form employees’ updated skills and expertise which ultimately fosters software enterprise’s innovative capabilities to attain competitive advantages in a specific industry.

This research is one of the few studies to examine the potential antecedents of WSTK and their final effects within software SMEs in the form of TICs. As currently it is observed, an incredible increase of skills oriented innovations in firms particularly in the software domain and IT industry. Therefore, this study emphasizes how PI, OT and WSTK positively affect TIC of Pakistani software SMEs. However, the study could be considered as a guideline for the academia and practitioners who attempt to strengthen the technological innovations capabilities in software SMEs.