Performance of small and medium enterprises (SMEs) has been addressed widely in the literature. Developed and developing both the countries are highly concerned about the growth and performance of small and medium enterprises. The literature over the performance is abundant, however, has certain controversies. To identify the reasons behind those controversies, this study has been conducted. the aim of the study was to identify the mediating role of dynamic capabilities which are developed by the entrepreneurial networks and entrepreneurial orientation. The study collected the data from those small and medium enterprises which were connected through a closed network and were the part of groups. The data was collected with the help of adopted questionnaire. 100 small and medium enterprises were contacted for the collection of data. The sample firms were chosen on purposive sampling basis. Structural equation modelling was applied to identify the direct impacts and the mediating impact. The findings identified that among the chosen firms, entrepreneurial networking has an insignificant impact, however, entrepreneurial orientation has shown a significant positive impact. Furthermore, the mediating role of dynamic capabilities was significant in both the relationships. The findings suggested that the sector should develop strong networks and should consider strategic alliances to gain competitive edge. Future researchers are guided to implement the same framework along with the dimensions of the variable.