The Role of Gender Diversity in A Model of the Dynamic Capabilities of Management Teams, SME’s Competitive Advantage and Performance

Objective: 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 phenonoma (Wang and Ahmed, 2007, Barreto, 2010, Eriksson, 2014). There is, eventually, limited empirical evidence available that examines the influences of dynamic capabilities have on the competitive advantage and firms performance, specially, under the impact of gender diversity of management teams. Literature: Dynamic capabilities are defined as “the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments” (Teece et al., 1997, p. 516). In doing so they create value, derived from the capacity of a management team to identify opportunities and threats and reconfigure a firm’s repertoire of resources and operations to address them (Teece, 2007). Upper Echelons theory has suggested that the decisions of management teams which significantly influences firms’ performance is consistent with the teams’ cognitive or executive orientations (Finkelstein and Hambrick 1996; Hambrick and Mason 1984). Such managerial approaches determine the ways in how management teams gather, filter and interpret information related to business environment, as well as how to response to environmental changes (Finkelstein and Hambrick 1996; Hambrick 2007). Extant literature has shown that the proportion of women in management teams changes such managerial activities, considered as key components of dynamic capabilities, which in turn positively influence firms’ performance. Approach: This study employs an internet-based survey to explore the dynamic capabilities of management teams, competitive advantage and performance of 274 SMEs in the UK. 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). This measurement is validated by using the confirmatory factor analysis method before being utilized to examine a research framework. To measure the competitive advantage and performance of SMEs, this study employs measurements adopted and validated by extant research (Pisano and Wheelwright, 1995; Hill and Jones, 2007; Wu, Wang, Tseng, and Wu, 2009; and Lumpkin and Dess, 2001). This study’s analysis entails a three-stage approach; a measurement model using confirmatory factor analysis (CFA) to examine the validity and reliability of measurements, a structural model to test the relationships among latent variables (Byrne, 2010), and a multigroup structural equation modelling to compare the male-dominant and non-male-dominant models. Findings: The results indicate support for hypotheses in which the dynamic capabilities of management teams has a significantly positive influence on competitive advantage, which in turn, enhances the performance of SMEs. The multigroup SEM analysis reveals that, within SMEs led by non-male-dominant teams, the dynamic capabilities have a significantly positive influence on firm’s performance, but this significantly link is not hold in the cases of SMEs led by male-dominant management teams. Values: This study examines the influence that the dynamic capabilities of management teams had upon the competitive advantage and performance of SMEs. We build on insights into the antecedents of dynamic capabilities in the context of gender diversity of management teams to addresses a fundamental: How the gender diversity of management teams changes the effects of dynamic capabilities had on SME’s competitive advantage and performance. The results from this study also helps to clarify a controversy over the relationship between dynamic capabilities and a firm’s performance.