How organizational learning affects a firm's flexibility, competitive strategy, and performance

Abstract

An organization's ability to learn is a key strategic capability to compete in modern markets. This research seeks to achieve an in-depth understanding of learning's contribution to a firm's competitiveness by analyzing how organizational learning (OL), understood as a dynamic capability, shapes firms' strategic flexibility and competitive strategy implementation to ultimately improve customer, financial, and market-related performance. This article proposes that OL acts as a forerunner of a firm's ability to adapt to evolving market conditions (strategic flexibility), and that OL and flexibility simultaneously foster the implementation of differentiation and cost-leadership strategies. This strategic behavior allows firms to reduce costs without damaging differentiation levels, and to improve customer and business performance. The study employs structural equation modeling (SEM) to evaluate the causal links that the research model depicts. Data analysis follows from a sample of 181 medium-sized Spanish manufacturing firms. The results confirm the expected relationships and reveal OL to be an important instrument in modern markets to provide customer value and to improve organizational performance by means of efficient competitive strategy design and flexible adaptation to rapid market evolution.