Entrepreneurs’ Dynamic Capabilities, Financial Resource Development and Financial Performance Among Small and Medium Enterprises in Emerging Markets: Experience from Tanzania

Abstract

AbstractSmall and medium enterprises (SMEs) are the driving force behind the transformation of a developing economy into an emerging economy. However, for this to happen, SMEs must have owner-managers with dynamic capabilities that can help them acquire, plan and develop financial resources to achieve high financial performance. Previous studies have identified the existing gap on the link between dynamic capabilities and financial performances, particularly when mediated by financial resource development. This current study aims at studying the mediating role of financial resource development on the relationship between dynamic entrepreneurial capabilities and the financial performance of SMEs. The study used a cross-sectional design. The structured questionnaire was applied to collect data from 363 owner-managers, with a snowball sampling strategy cast-off to achieve the study’s objective. The findings revealed that the dynamic capabilities (sensing, seizing, learning and transforming) significantly correlate with financial resource development. Also, the findings indicate that financial resource development significantly influences SMEs’ financial performance. The study indicates further that financial resource development is significantly linked to financial performance, indicating a partial mediator. The study results imply that policymakers and implementers can use the findings to create relevant policy measures to enhance dynamic entrepreneurial capabilities and financial resource accessibility to impact SMEs’ financial performance positively.KeywordsDynamic capabilitiesSensingSeizingLearningTransformingFinancial performanceFinancial resource development