Investigating the dynamic capabilities and competitive advantage of South African SMEs

Abstract

This study investigates the dynamic capabilities (DCs) and competitive advantage of South African small and medium enterprises (SMEs). DCs are organisational processes purposefully designed to alter the “firm’s resource base” in other to achieve competitive advantage in a rapidly changing environment. DCs govern a firm’s “valuable, rare, inimitable and non-substitutable” organisational resources. Research has shown that South African SMEs contribute approximately 35% to the national gross domestic product. SMEs are significant in their contributions to economic growth, innovation of new products, technological progress and competitive advantage. However, most SMEs are confronted with challenges such as; changes in technologies, innovative products, customer demands, and the desire to remain flexible. SMEs are often faced with competitive forces which threaten their survival. The failure rate of SMEs is much higher than that of largerorganisations. South African SMEs fail at a rate of between 70 and 80%. SMEs need DCs to achieve competitive advantage in fast changing business environments. Research on DC has been on a piecemeal basis. An empirical research on SMEs’ DC from a developing countries context has not received wide attention. Through an online based survey of South African SMEs, our paper provides an insight into the types of organisational capabilities or DCs that can lead to competitive advantage within the SMEs. The statistical findings clarify the notion that DCs alone cannot lead to competitive advantage. It was found that sensing, integrative and behavioural capabilities are part of DC constructs: this study extends the used four DC constructs (absorptive, adaptive, innovative and networking capabilities) to include sensing, integrative and behavioural capabilities. The findings show DCs have significant impacts on competitive advantage, and are capable of influencing SMEs’ valuable, rare, inimitable and non-substitutable (VRIN) resources to achieve competitive advantage in a fast changing business environment.   Key words:  Competitive advantage, dynamic capability, small and medium enterprises.