This empirical study investigates the relationship among Dynamic Capabilities (DCs), the quality and financial aspects of firm performance in small- and medium-sized enterprises (SMEs), and the mediating role of Business Model Innovation (BMI) in a developing country context. Following a pilot study of structured interviews with owners/managers, we conducted a questionnaire study on 160 Turkish SMEs. We tested the hypotheses using partial least squares structural equation modelling (PLS-SEM). Factor analysis findings confirm the multilayer character of our DCs construct. Owner-manager DCs are positively associated with financial performance, while employee-level DCs are positively associated with quality performance. BMI partially mediates the relationship between Owner-manager DCs and financial performance, and fully mediates the Owner-manager DCs-quality performance relationship. In contrast, BMI fully mediates the relationship between Employee-level DCs and financial performance, and partially mediates the Employee-level DCs-quality performance relationship. The study provides practical insights for SMEs operating in developing economies on how to translate their organisational capabilities to improved performance. It also extends the literature on the antecedents of BMI by examining a DCs framework enriched with organisational layers.
Ogrenci et al. (Thu,) studied this question.