Exploratory Study on Relationship between Entrepreneur Characteristics and Dynamic Capabilities in Export SMES

Abstract

Small and medium-sized enterprises (SMEs) play a key role in economic and social development of any country. However, research has revealed that SMEs in Sri Lanka suffer from poor sustainability and low performance compared to other countries. According to the literature, SME performance is associated with directly unobservable owner and firm factors which are based on internal capabilities. With the ever-increasing dynamism of the market and increased competition from large multinational companies, it is essential for the SMEs to adapt to the environment promptly. Dynamic capabilities of export SMEs must be more amplified and leveraged than those of a firm with a less ambitious, purely domestic SMEs. Given the strong position of entrepreneur in the SME context, this study argues that antecedents to dynamic capabilities can be found at the individual entrepreneur level. It identifies entrepreneurial orientation, human capital and social capital of the entrepreneur as key characteristics at the individual level. This research used a quantitative research methodology and a randomly selected sample of 197 export SMEs in Sri Lanka were analyzed. The results were analyzed using partial least squares–structured equation modelling (PLS–SEM). This study empirically established that entrepreneur characteristics positively influence development of organizational dynamic capabilities. The outcome of this research will enhance the understanding of SME capability development process.