Is exploring dynamic capabilities important for the performance of emerging market firms? The moderating effects of entrepreneurial orientation and environmental dynamism

Abstract

In spite of the prominence of dynamic capabilities (DCs) perspective it is still unclear whether and under what conditions DCs contribute to firm performance. This study develops and tests an interactive view emphasizing the moderating effects of internal entrepreneurial orientation and external environmental dynamism on the contribution of the exploration of emerging market firms’ (EMFs) DCs to their performance. Using a unique sample of manufacturing firms in China’s emerging market, the study provides general support for such moderating effects. We find that exploring the DCs of EMFs is positively associated with their performance. The results indicate that although exploring DCs fosters the performance of EMFs, the benefits are conditional on the internal and external conditions of the firms. That is, entrepreneurial orientation strengthens, whereas environmental dynamism impedes, the positive effect of exploring DCs on the performance of EMFs.