Dynamic capabilities as microfoundations for sustainable competitive advantage in culinary Indonesian SMEs

While research on dynamic capabilities (DCs) has flourished, studies explicitly linking micro- and macro-level processes remain sparse. Specifically, the mechanisms through which individual learning capabilities transform into sources of sustainable competitive advantage (SCA) are often overlooked. This study investigates the impact of learning capabilities on SCA, mediated by innovative work behavior (IWB), with innovation climate (IC) serving as a critical moderator. Adopting a quantitative survey approach, data were collected from 380 randomly selected employees in the culinary micro and small enterprise (MSE) sector. Hypotheses were tested using covariance-based structural equation modeling (CB-SEM) via AMOS 25, supplemented by Hayes’ Process Macro in SPSS 25 for moderation analysis. The finding shows IWB is an output of the transformative process that bridges learning capabilities at the micro level. Learning capabilities significantly influence both IWB (β = 0.468) and SCA (β =0.420), while IWB exerts a direct effect on SCA (β = 0.303). establishing IWB as a partial mediator. The innovation climate moderates the effect of learning capability and innovative behavior by creating an environment that supports collaboration. However, the function of innovation climate as a moderating variable has a threshold for both IWB and SCA. This inverted U-shaped moderation suggests that an optimal, flexible climate is essential; conversely, excessive climate rigidity and high-intensity formalization trigger sensitivity redundancy, which stifles micro-level innovation. This study contributes to the dynamic capabilities literature by extending the concept of dynamic capabilities through a micro-foundations approach to explain how the mechanism of change from individual capabilities into organizational competitive advantage occurs, with the innovation climate serving as a non-linear boundary condition (inverted U-shaped curve) that determines the effectiveness of this transformation in culinary SMEs.