Dynamic Capabilities Development: An Examination of Exporting Small-to-Medium Enterprises (SMEs) in Malaysia

As time has evolved, the business environment has become more dynamic and such that the original propositions of the resource based view (RBV) is being challenged for being static and neglecting the influence of market dynamism. This is particularly important for exporting small-to-medium sized firms (SMEs), firms that seek a significant competitive advantage from the use of their resources in pursuing international sales in one or multiple countries. The rapid growth of the dynamic capabilities literature and its diversity have led to a rich but still disconnected body of research pointing in dissimilar directions. Prior researchers reported that there is not much attention given to the process of how capabilities develop, emerge or evolve especially in SMEs that have limited resources, knowledge bases and expertise in building and integrating diverse capabilities. Thus, there is a question to ponder about how these small exporting firms could survive in a dynamic environment with a lack of resources and skills. Building on ideas of emerging and branching dynamic capability, this study uses a sample of 130 Malaysian exporting SMEs in manufacturing industries and hypotheses are tested using Structural Equation Modelling. A web-based survey questionnaire and return postal set of surveys were distributed to managers/founders/owners of selected exporting SMEs in Malaysian. The results suggest that operation slack has a strong positive moderation effect between learning exploration and emerging dynamic capability of sensing and moderation between innovation exploration and an emerging dynamic capability of learning. The other moderators, such as financial slack, past business performance and international diversity had resulted as negative moderators for the particular path. Furthermore, these study also proving the link between dynamic capabilities, substantive capabilities and business performance. The results show that, substantive capabilities do have direct effect towards business performance. Overall, the key finding of this study is to unpack the relationships between dynamic capabilities and business performance