Importance of dynamic managerial capabilities on the performance of small family businesses

Salvador Samuel Guajardo Treviño,Laura Esther Zapata Cantú

doi:10.22201/fca.24488410e.2020.2132

Abstract

This research aims to determine how an entrepreneurial chief executive officer’s (ECEO) level of dynamic managerial capabilities (DMCs) influences the performance of small family firms, as well as family firm governance structure moderates this relationship. Additionally, this paper offers insights into one antecedent of ECEOs’ DMCs, namely managerial human capital. A total of 213 observations were obtained from ECEOs who have founded and operate a minimum of one small family firm in Mexico. After testing the hypotheses using a structural equation model, a positive relationship was found between the level of an ECEO’s DMC and family firm performance. It was further observed that family governance structure in the firm could positively moderate ECEO DMCs’s effect on firm performance, where family governance structure was calculated as the number of family members that work in the family firm independently, formally, or informally, as well as whether they work full-time or part-time. Overall, the results indicate that in small family firms, the ability to change and adapt to create a sustainable competitive advantage depends, to some degree, on certain types of individual capabilities (DMCs), rather than simply on organizational capabilities, known as dynamic capabilities (DCs).

Highlights

IntroductionToday’s fast paced-world forces firms to adapt fast to environmental changes. Such adaptation behaviors can include, among others, doing nothing and ignoring the situation, ad-hoc problem solving, trial and error efforts, and developing dynamic capabilities (Teece, 2007; Teece, 2018; Winter, 2003;).There are well-documented cases where the use of dynamic capabilities (DCs1) has resulted in positive firm-level outcomes
It was further observed that family governance structure in the firm could positively moderate executive officer (ECEO) dynamic managerial capabilities (DMCs)’s effect on firm performance, where family governance structure was calculated as the number of family members that work in the
A quantitative survey study was conducted to examine the theory of dynamic capabilities (DCs), the relationship between DMCs and firm performance, which was controlled by factors such as firm age, size, and sector

Summary

Introduction

Today’s fast paced-world forces firms to adapt fast to environmental changes. Such adaptation behaviors can include, among others, doing nothing and ignoring the situation, ad-hoc problem solving, trial and error efforts, and developing dynamic capabilities (Teece, 2007; Teece, 2018; Winter, 2003;).There are well-documented cases where the use of dynamic capabilities (DCs1) has resulted in positive firm-level outcomes. Today’s fast paced-world forces firms to adapt fast to environmental changes. Such adaptation behaviors can include, among others, doing nothing and ignoring the situation, ad-hoc problem solving, trial and error efforts, and developing dynamic capabilities (Teece, 2007; Teece, 2018; Winter, 2003;). There are well-documented cases where the use of dynamic capabilities (DCs1) has resulted in positive firm-level outcomes. One of such examples is IBM’s impressive transformation in the 1990s, which saw the firm successfully shift its core business from hardware manufacturing to providing services and software. Samsung Electronics’ transformation in the semiconductor industry is another case where use of developed dynamic capabilities (DCs) contributed to firm survival and success (Lee and Slater, 2007)

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