The effect of dynamics capabilities on innovative capability and export performance the moderating role of exporter-importer relationship conflict

Abstract

Small and medium enterprises (SMEs) have become a vibrant and dynamic sector of the world economy due to trade liberalization. The reason for SME expansion into cross border market is to sustain competitive advantage. Previous studies have highlighted the importance of global business environment to the SMEs performance. The global business environment is becoming more dynamic and turbulent; therefore, it is undeniable that SMEs are facing global challenges. However, research on how export performance is achieved in dynamic environment is still incomplete. Firm needs to integrate, build, and reconfigure its competences such as market orientation capability, absorptive capability, and adaptive capability in order to successfully compete in rapidly changing environment. Therefore, this study adopts dynamic capabilities theory because dynamic capability permits the firms to reconfigure internal and external resources that create new resources such as innovative capability as mediating variable and assist to improve performance especially for exporting SMEs. The relational exchange is tended to be treated mostly as a research background, and not getting much attention in explaining firms’ strategic behaviour and export performance. Questionnaire survey were sent to Malaysian SMEs involved in export market, and 124 return questionnaires were analysed using SMART PLS and SPSS V29 to test the hypotheses. The results indicated that there is a direct relationship between export performance and innovative capability, as well as market orientation capability and adaptive capability. However, no relationship was found for absorptive capability. This study also tests the mediating relationship of innovative capability and moderating relationship of exporter-importer relationship conflict were also tested, and it was found significant for absorptive capability towards innovative capability. This study adds to the body of knowledge by examining the factor dynamic capability, mediating, and moderating variable into one comprehensive model. From the theoretical perspective, the findings suggest that dynamic capability and relational exchange theory facilitate the SMEs to build competitive advantage and achieve greater export performance. This study manages to produce new knowledge and therefore research novelty by improving our understanding of exporter-importer relationship in the perspective of dynamic capability. Specifically, the findings of the moderating influence of relationship conflict on the interaction among capabilities and export performance is novel. From a practical perspective, the findings suggest the need to build exporter-importer relationships to enhance innovative capabilities and the importance of adaptability and innovative capabilities to SME in Malaysia. These findings can also be used by governments and policy makers to adjust policies regarding SMEs. The practical implications of the study indicate that innovative capability and adaptive capability as the main ingredients for Malaysian SMEs to achieve better export performance.