Impact of Dynamic Capabilities on Business Performance of SMEs during an Economic Crisis with reference to Western Province

Abstract

The current economic crisis which is experiencing has a significant impact on the development and performance of most SMEs, making their existence even more susceptible. In the face of the current economic crisis, Dynamic capabilities (DCs) can be utilized as a survival mechanism to help organizations to increase the value of their businesses, get competitive advantages, and increase business performance in a changing business environment. Therefore, the purpose of this paper is to analyze the impact of three dimensions of DCs which are sensing, seizing, and reconfiguring on the business performance of SMEs during this economic crisis. In addition, this study investigates how DCs could impact business performance through Information technology (IT) adoption as a moderator. The quantitative approach is adopted, where a cross sectional survey was utilized to collect primary data from SMEs. Findings of the study based on a sample of 380 SMEs in western province and stratified random sampling method was utilized to select participants. Structural Equation Modeling (SEM) was used to analyze data by using Smart PLS 4 software. The results revealed that only sensing and reconfiguring capabilities have a significant impact on SMEs’ performance and IT adoption moderates the relationship between DCs and business performance during the economic crisis. Therefore, this study provides a great effort to quantitatively investigate the impact of three procedures of DCs and the moderate effect of IT adoption during the economic crisis. Furthermore, it conveys a better understanding of how SMEs could deploy their DCs to ensure higher levels of performance in periods of crisis. The results of this research will pave a path for them to successfully take effective strategic decision on the SMEs. Keywords: Business Performance, Dynamic Capabilities, Economic Crisis, and SME.