Surviving an economic downturn: Dynamic capabilities of SMEs

This study examines dynamic capabilities contributing to SME survival and growth during an economic downturn. Adopting a qualitative approach using the collective, instrumental case-based method, we conducted forty interviews with both successful and unsuccessful franchisees and independent SMEs, business and franchising experts, and franchisors in Australia. A framework of SMEs’ success was developed. Under survival mechanisms, it confirms the importance of business owner characteristics and firm resources. Three dimensions of dynamic capabilities are sensing (business assessment and information acquisition), seizing (product portfolio decisions, and investment in technologies and human resources) and reconfiguring (innovation, decentralization and knowledge management). It was found that performative routine aspects were more dominant, demonstrating the flexibility and context-dependence in the deployment of dynamic capabilities among SMEs. The research fills a gap in the entrepreneurship literature by investigating SMEs’ dynamic capabilities in a turbulent market with a special focus on unravelling salient ostensive and performative routine aspects.