1 Dynamic capabilities and entrepreneurial team development in

Dynamic capabilities (DC) are concerned with the ability of organizations to change. Literature on DC does not always consider the degree of change in the organization and the degree of proactivity implied by the interaction between the organization and the environment. We suggest that the latter feature is specifically relevant in the case of SMEs where innovation and growth is often associated with the exploitation of new business opportunities. Empirical evidence shows that new venture creation by established entrepreneurs is often carried out through the setting up of new companies, thus resulting in the formation of a business group. One of the main reasons for this is to involve other persons in the ownership and control of the new business. This is in accordance with theoretical models of entrepreneurial specialization that underline the difficulty for entrepreneurs to create new ventures while retaining the ownership and control of the ones already established. This difficulty can be overcome by enlarging the entrepreneurial team. The paper suggests that the manipulation of the governance structure of groups through the development of an entrepreneurial team is an important capability in SMEs to sustain their processes of innovation and growth