Dealing with surprise attacks: decomposing ERM as a dynamic capability to handle crises

Abstract

PurposeTurbulent hypercompetitive market conditions make small and medium enterprises (SMEs) vulnerable to abrupt crises caused by unexpected competitor moves. In these situations, enterprise risk management (ERM) can serve as a dynamic capability (DC) to overcome the impending crisis and improve SMEs' survival rates. To explore this capacity, which has only been vaguely addressed in prior research, we conduct an exploratory, abductive study to update the extant (ERM and DC) literature with empirical evidence from expert interviews.Design/methodology/approachWe conduct an exploratory, abductive study using empirical evidence from expert interviews.FindingsOur findings reveal ERM as a second-order DC in the micro-foundational components of competitive intelligence gathering, alliance building and integrative capabilities. We find that competitive intensity and government policy moderate the effects of these foundational capabilities. Finally, our study proposes a survivability model that provides new valuable knowledge of ERM as a DC for SMEs to deal with competition-driven crises.Originality/valueThis research survivability model shows how ERM as DC can facilitate the survivability of SMEs against competitive surprises. Although restricted to crises arising out of competitive surprises, this study provides valuable knowledge to the literature on what type of DCs are useful for specific situations. The study findings not only extended Teece's (2007) DCs framework to competitive crises but also placed it within a hierarchy of capabilities. The research findings indicate that an ERM culture in SMEs promote the growth and development of sensing, seizing and reconfiguring capabilities, vital for tiding competitive crises.