The Impact of Dynamic Capabilities on SME’s Competitive Advantage and Performance: An Empirical Study from the Gender Perspective of Management Teams

Background: Dynamic capabilities defined as “the firm’s ability to integrate, build, and reconfigure internal and external competences to address environmental change” (Teece et al. 1997, p. 516). increase performance by helping firms change operations more efficiently and effectively; through the creation of novel strategies, markets, skills, and organizational forms (Zahra et al. 2006, Teece 2007, Easterby-Smith et al. 2009, Wilhelm et al. 2015). As such, dynamic capabilities help to answer a fundamental question of how a firm can develop skills and competencies which create and sustain competitive advantage (Zahra et al. 2006, Franco et al. 2009, Mitchell and Skrzypacz 2015). Purpose: While there is agreement that dynamic capabilities facilitate a firm’s competitiveness; there remains a lack of clarity around the notion and complexity surrounding the way in which they evolve (Eriksson, 2014). This, in particular, has created difficulties in identifying valid measurement tools to appraise their creation and deployment leading to the extant literature to rely upon qualitative, often longitudinal, case studies to analyse the phenomena (Wang and Ahmed, 2007, Barreto, 2010, Eriksson, 2014). This research employs a quantitative research approach to explore the influences of dynamic capabilities had on the competitive advantage and performance of SMEs, and to examine how the gender structure of management teams plays its role within this model. Design/methodology/approach This study is distinct from previous research as it employs a quantitative method and constructs a new multidimensional dynamic capability measurement by aggregating definitions, analysis and suggestions from previous literature to establish and test hypotheses (Teece, 2014). To measure competitive advantage, the validated measurements from Pisano and Wheelwright (1995), Hill and Jones (2007) and Wu, Wang, Tseng, and Wu (2009) will be employed. Measurements conducted by Lumpkin and Dess (2001) will be adopted to measure the performance of a firm. These measurements were validated by using the confirmatory factor analysis method before being utilized to examine a research framework. To test research hypotheses, this study uses structural equation modelling (SEM) and multi group structural model of two groups, management teams of majority male and teams of majority female or having a similar composition. Findings The results from structural model indicate that the dynamic capabilities of management teams have a significant positive impact on the competitive advantage, which in turn significantly positively influence the SME’s performance. However, there is no significant impact of dynamic capabilities on the SME’s performance were found. The results also show that, in SMEs led by management teams with majority male, dynamic capabilities have no significant influence on performance, but this relationship is significantly positive when firms were led by teams with majority female or having similar composition. Research limitations A new measurement to measure dynamic capabilities was conducted, but to ensure its validity and reliability it was developed and tested following standard protocols (De Vellis, 2003). Originality/value This study introduces a new validated measurement to examine dynamic capabilities, and empirically confirms the influence of dynamic capabilities had on a firm’s competitive advantage. It clarifies how the gender composition of management teams influence the relationships among dynamic capabilities, competitive advantage and performance of SMEs.