Investigating the relationship between business strategy, distinctive capabilities, environment and performance of manufacturing SMEs in Palestine

The main objective of this study is to examine the relationship between distinctive capabilities (DC), business strategy (BS), business environment (BE) and performance of manufacturing SMEs in Palestine. Additionally, to investigate the moderating effect of environment uncertainty on the relationship between distinctive capabilities and performance of SMEs. Based on contingency, industrial organization and resource-based view theories, the study explores whether DC (i.e., Administrative activities, Production and Operations activities, Marketing activities, Financing activities and Human Resource activities), BS (i.e., Low cost strategy, Differentiation strategy, Growth strategy, Hold and maintain strategy, Bare bone strategy, Specializing by product type strategy and Specializing by customer type strategy), and BE (i.e., Market environment, Technological environment and Competitive environment) have a significant influence on performance. Data were collected from the manufacturing SMEs operating in West Bank in Palestine, using a cross-sectional study design. The study adopts proportionate stratified random sampling design 341 respondents and questionnaires were distributed and collected through the personally-administered method. Partial Least Squares Structural Equation Modelling (PLS-SEM 3.0) and one-way ANOVA in IBM SPSS statistics 24 was used to test the study hypotheses. The findings indicate that there is a significance difference between the business strategy implemented by the manufacturing SMEs and performance, the proposed relationship between distinctive capabilities and performance was highly significant. Although the performance was not influenced by administration, production, marketing and human resource, while its influenced by finance. Moreover, the strength of business environment had a negative moderating effect on the relationship between distinctive capabilities and performance of manufacturing SMEs in Palestine