Modeling Dynamic Capabilities and Firm Performance: The Moderating Role of Organizational Flexibility and Entrepreneurial Orientation

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This study investigates how multiple dynamic capabilities contribute to competitive advantage and firm performance among manufacturing firms in Malaysia. Drawing upon the dynamic capability view, the study examines the effects of research and development capability, big data analytics capability, information technology capability, innovation capability, and marketing capability on competitive advantage, alongside the moderating roles of organizational flexibility and entrepreneurial orientation. Data were collected through an online questionnaire survey involving 226 managers from medium and large manufacturing firms in Malaysia and analyzed using partial least squares structural equation modeling. An importance‐performance map analysis was additionally conducted as a complementary analysis to identify which capabilities constitute managerial priorities for strengthening competitive advantage. The findings reveal that all rigorously tested constructs, except marketing capability, positively influence competitive advantage. Entrepreneurial orientation positively moderates the relationship between innovation capability and competitive advantage, whereas organizational flexibility does not significantly moderate the relationship between big data analytics capability and competitive advantage. In addition, competitive advantage significantly improves both market performance and financial performance. This study contributes to the dynamic capability view literature by providing a broader understanding of how multiple complementary organizational capabilities support competitive advantage formation through the processes of sensing opportunities and market changes, seizing strategic opportunities through resource mobilization, and transforming organizational resources and routines under dynamic business environments. The study further extends contemporary strategy literature by highlighting the contextual roles of entrepreneurial orientation and organizational flexibility in influencing the effectiveness of dynamic capabilities within an emerging economy manufacturing context. From a managerial perspective, the findings suggest that manufacturing firms should prioritize capability alignment, innovation orientation, and digital capability development to sustain competitiveness and improve organizational performance under technological and market turbulence.