Exploring the Role of Individual Level and Firm Level Dynamic Capabilities in SMEs’ Internationalization

Abstract

This paper presents a multi-level model that examines the impact of dynamic capabilities on the internationalization of SMEs while taking into account the interactions among them. The purpose of the research is to understand the applicability of dynamic capabilities at the individual and the firm level to the SME internationalization process in developing country context and to assess to what extent a firm's asset position and individual level dynamic capabilities influence the generation of firm level dynamic capabilities in SMEs. First, the dynamic capabilities theory was theoretically linked to the internationalization phenomenon. The relationships among firm-level dynamic capabilities, individual-level dynamic capabilities (owner specific dynamic capabilities), and internationalization were identified. The research framework and hypotheses were developed and empirically tested with 197 SMEs. The findings established that owner-specific dynamic capabilities have a positive influence on both firm dynamic capabilities and internationalization, and firm dynamic capabilities positively influence internationalization. It was also found that the market assets position measured as perceptual environmental dynamism positively influenced firm dynamic capabilities but structural and reputational asset positions of SMEs did not influence generation of firm dynamic capabilities. Moreover, firm dynamic capabilities had a mediation effect in the relationship between owner-specific dynamic capabilities and internationalization. Theoretically, this confirms the relevance of dynamic capability theory to internationalization and the possibility of integrating existing internationalization theories. Entrepreneurs, SME managers, and policy-makers could gain valuable insights on how entrepreneur and firm capabilities lead to better international prospects from this outcome.

Exploring Entrepreneurial Capabilities for International Entrepreneurship: A Study of International Entrepreneurship Sense-making Narratives in Sri Lanka

“…It was found that both EO and EC had a positive relationship with internationalization according to the research of many scholars (e.g., Deligianni et al 2015). In research carried out in Sri Lanka by Mudalige, Ismail and Malek (2019) established that EO and social capital have a positive influence on SME internationalization.…”

Dynamic capability of the firm: analysis of the impact of internationalisation on SME performance in an emerging economy

“…to increase assets firms' assets (Javalgi and Todd, 2011). A number of studies suggest that internationalisation has a positive impact on the growth of a firm's assets (Mudalige et al, 2019;Ling-yee and Ogunmokun, 2001;Chelliah et al, 2010). However, authors such as Hoang (1998), Wolff and Pett (2000) and Shoham et al (2002) did not find any positive impact.…”

“…In conditions involving dynamic and fast-changing environments, DCV explains firm competitiveness more effectively than RBV (Lin & Wu, 2014). Mudalige et al (2019) conceptualise these are organisational dynamic capabilities and institutional dynamic capabilities. Such a perspective implies that both the firm's internal resources external resources must be strategically exploited to create competitive advantage.…”

Variability of dynamic capabilities in the small business development process

“…For this purpose, the operationalization based on one-dimensional indicators, which despite its limitations is successfully applied in research practice e.g., (Pervan, Curak, & Pavic Kramaric, 2018), was used. Results of many studies so far have con irmed a positive impact of dynamic capabilities on the performance and scope of SMEs' market activity (Mudalige, 2015;Rice, Liao, Galvin, & Martin, 2015), on the level of SMEs' internal and open innovation (Nolsøe Grünbaum & Stenger, 2013;Grimaldi, Quinto, & Rippa, 2013;Ripain, Amirul, & Mail, 2017), as well as on SMEs' proactive posture and capability to integrate resources in recognising new opportunities in an environment characterized by high volatility and uncertainty (Battisti & Deakins, 2017;Halim, Adnan, & Khusaini, 2017). An important contribution to the development of the theory and practice of dynamic capabilities was also made by studies conducted by Polish authors.…”