The Role of Dynamic Capability in Mediating the Effects of Environmental Dynamism and Managerial Capabilities on Firm Performance: a Preliminary Study

  • Adrian Permana Graduate School, Widya Mandala Catholic University, Surabaya, Indonesia
  • Lena Ellitan Unika Widya Mandala
Abstract Views: 896 times
PDF Downloads: 545 times
Keywords: Firm Performance, Dynamic Capabilities, Environmental Dynamism, Managerial Capabilities, Small Medium Enterprises (SMEs)


SSmall and Medium Enterprises (SMEs) face many challenges from the coming rapid changes such as technology advancement, competitions, limitations and supports from government regulations, and limitations in terms of capital supply, product knowledge, and company management. Building and maintaining the firm performance of SMEs can be achieved through external factors (environmental dynamism) and internal factors (managerial capabilities). By using the dynamic capabilities as an intervening variable, it is expected to have an impact on firm performance by measuring the perceptive from owners or managers of SMEs. By using PLS-SEM analysis, the selected samples in this study consisted of 30 owners or managers of SMEs from Surabaya, Indonesia. The results indicated that the environmental dynamism and managerial capabilities have a significant influence on firm performance with dynamic capabilities as the intervening variables. Environmental dynamism also has a significant influence on firm performance. Meanwhile, managerial capabilities do not have a significant influence on firm performance.


Download data is not yet available.


Adner, R, & Helfat, C.E. (2003). Corporate effects and dynamic managerial capabilities. Strategic Management Journal, 24, 1011-1025.
Ardiana, I.D.K.R, Brahmayanti, I.A., & Subaedi (2010). Kompetensi SDM UKM dan pengaruhnya terhadap kinerja UKM di Surabaya. Jurnal Manajemen Dan Kewirausahaan. 12(1), 43-55.
Argote, L. (1999). Organizational Learning: Creating,Retaining and Transferring, (pp. 321-331). New York: Springer US.
Athreye, S. (2005). The Indian Software Industry and its Evolving Service Capability. Industrial and Corporate Change, 14(3), 393-418
Castanias, R.P. & Helfat, C.E. (2001). The managerial rents model: Theory and empirical analysis, Journal of management, 27, 661-678.
Cepeda, G., & Vera, D. (2007). Dynamic Capabilities and Operational Capabilities : A knowledge management perspective, Journal of Business Research, 60, 426-437
Chien, S.Y. & Tsai, C.H. (2012). Dynamic Capability, knowledge, learning, and Firm Performance, Journal of Organizational Change Management, 25, 434-444
Christian & Ardianti, R.R. (2013). Analisa modal sosial dan kinerja bisnis pada pengusaha sektor formal usaha mikro dan kecil di Jawa Timur, Agora, 1(3).
D’Este, P. (2002). The distinctive patterns of capabilities accumulation and inter-firm heterogeneity: the case of the Spanish pharmaceutical industry. Industrial and Corporate Change, 11(4), 847-874.
D'Aveni, R. (1994). Hypercompetition, New York: Free Press
Dess, G.G. & Beard, D.W. (1984). Dimensions of organizational task environments, Administrative Science Quarterly, 29, 52-73.
Eisenhardt, K.M., & Schoonhoven, C.B. (1990). Organizational growth: Linking founding team, strategy, environment, and growth among U.S. semi conductor ventures. 1978-1988. Administrative Science Quarterly, 35, 504-509.
Gelaskanycz, M.A., & Hambrick, D.C. (1997). The external ties of top excecutives: Implications for strategic choice and performance, Administrative Science Quarterly, 42, 654-681.
Gupta, V.K., Dutta, D.K., & Chen, X. (2014). Entrepreunial orientation capability and Firm Performance under conditions of Organizational Learning, Journal of Managerial Issues, 21, 157-173.
Hair Jr, J.F., Sarstedt, M., Hopkins, L., & Kuppelwieser (2014). Partial least squares structural equation modeling (PLS-SEM): An emerging tool in business research, European Business Review.
Hansen, M.T., Nohiria, N., & Tierney, T. (1999). What’s Your Strategy for Managing Knowledge? Harvard Business Review, 3(March-April), 107-116
Harreld, B.J., O’Reilly, III., Charles, A., & Tushman, M.L. (2007). Dynamic Capabilities at IBM: Driving strategy into action. California Management Review. 49(4), 21-43.
Helfat, C.E., Finkelstein, S., Mitchell, W., Peteraf, M., Singh, H., Teece, D.J., & Winter, S.G. (2007). Dynamic Capabilities. Understanding Strategic Change In Organization, London: Blackwell Publishing
Hill, H. (2001). Small and medium enterprises in Indonesia: Old policy challenges for a new administration. Asian Survey, 41(2), 248-270.
Hitt, M.A., Ireland, R.D., Sirmon, D.G., Trahms, C.A. 2011. Strategic Entrepreneurship: Creating Value for Individuals, Organizations, and Society. Academy of Management Perspectives, 25(2), 57-75.
Hitt, M.A., Keats, B.W., & DeMarie, S.M. (1998). Navigating in the new competitive landscape: Building strategic flexibility and competitive advantage in the 21st century. Academy of Management Executive, 12(4), 22-42.
Klassen,R.D. & McLaughlin. C.P. (1996). The impact of environmental management on Firm Performance. Management Science, 42, 198-1214.
Li, D.Y., & Liu, J. (2014). Dynamic Capabilities, Enviromental Dynamism, and Competitive Advantage: Evidence from China. Journal of Business Research, 67, 2793-2799.
Marino, L.D., Lohrke, F.T., Hill, J.S., Weaver, K.M., & Tambunan, T. (2008). Environmental shocks and SME alliance formation intentions in an emerging economy: Evidence from the Asian financial crisis in Indonesia. Entrepreneurship Theory and Practice, 32(1), 157-18.
Michel, J.G., & Hambrick, D.C. (1992). Diversification posture and top management team characteristics. Academy of Management Journal, 35(1), 9-37.
Mota, J., & de Castro, L.M. (2004). A capabilities perspective on the evolution of firm boundaries: A comparative case example from the Portuguese moulds industry. Journal of Management Studies, 41(2), 295-316.
Mourougane, A. (2012). Promoting SME development in Indonesia, working papers, OECD Economics Department.
Mulyadi. (2007). Sistem Perencanaan dan Pengendalian Manajemen: Sistem Pelipatganda Kinerja Perusahaan. Jakarta: Salemba Empat.
Oktemgil, M., & Greenley, G. (1997). Consequences of high and low adaptive capability in UK companies. European Journal of Marketing, 31(7/8), 445-66.
Penrose, E.T. (1959). The Theory of Growth of the Firm. New York: Wiley.
Sudiarta, I.P.L., Kirya, I.K., & Cipta, I.W. (2014). Analisis Faktor-Faktor Yang Mempengaruhi Kinerja Usaha Mikro Kecil Dan Menengah (UMKM) Di Kabupaten Bangli. e-Journal Bisma Universitas Pendidikan Ganesha Jurusan Manajemen, 2(1), 331-348.
Tambunan, T. (2008). SME development, economic growth, and government intervention in a developing country: the Indonesian story. Journal of International Entrepreneurship, 6(4), 147-167.
Teece, D.J. (2007). Explicating dynamic capabilities: The nature and microfoundations of (sustainable) enterprise performance. Strategic Management Journal, 28(13),1319 – 1350.
Teece, D.J., & Pisano, G. (1994). The Dynamic Capabilities of firms: an introduction. Industrial and Corporate Change, 3(3), 537-556.
Teece, D.J., Pisano, G., & Shuen, A. (1997). Dynamic Capabilities and Strategic Management. Strategic Management Journal, 18(7), 509-533.
Tiantian, G., Yezhuang, T., & Qianqian, Y. (2014). Impact of manufacturing Dynamic Capabilities on enterprise performance-the Nonlinear Moderating effect of Environmental Dynamism. Journal of Applied Sciences, 14, 2067-2072.
Tripsas, M. & Gavetti, G. (2000). Capabilities, cog- nition, and inertia: evidence from digital imaging. Strategic Management Journal, 21, 1147–1161.
Tsai, P.C., & Shih, C.T. (2013). Responsible downsizing strategy as a panacea to firm’s performance: The role of Dynamic Capabilities, International Journal of manpower, 31(8), 1015-1028
Wu, L.Y., 2006. Resources, dynamic capabilities and performance in a dynamic environment: Perceptions in Taiwanese IT enterprises. Information & Management, 43: 447-454.
Zahra, S.A., Sapienza, H.J., & Davidsson, P. (2006). Entrepreneurship and Dynamic Capabilities: A Review, Model and Research Agenda. Journal of Management Studies, 43(4), 917-955.
How to Cite
Permana, A., & Ellitan, L. (2020). The Role of Dynamic Capability in Mediating the Effects of Environmental Dynamism and Managerial Capabilities on Firm Performance: a Preliminary Study. Journal of Entrepreneurship & Business, 1(2), 70-83.