The mediating role of dynamic managerial capabilities: The interplay between dominant logic and small‐ and medium‐sized enterprises performance in China

• Published date: 01 May 2020
• Author: Shabnam Khan,Farhan Khan,Kashif Ullah Khan,Zhang Xuehe,Fouzia Atlas
• DOI: http://doi.org/10.1002/pa.2002
• Date: 01 May 2020

ACADEMIC PAPER

The mediating role of dynamic managerial capabilities: The

interplay between dominant logic and small- and medium-sized

enterprises performance in China

Kashif Ullah Khan

1

| Fouzia Atlas

3

| Zhang Xuehe

2

| Farhan Khan

4

|

Shabnam Khan

3

1

School of Information Management, Wuhan

University, Hubei, China

2

School of Public Affairs, University of Science

and Technology of China, Hefei, China

3

Department of Management Sciences,

Women University Swabi, Swabi, Pakistan

4

School of Information Management, Wuhan

University, Hebei, China

Correspondence

Kashif Ullah Khan, School of Information

Management, Wuhan University, Hubei, China.

Email: Kashifullah@giki.edu.pk; kashif1@mail.

ustc.edu.cn

Transition economies, such as China, are characterized by volatile and rapidly chang-

ing markets. Firms, in order to be successful and get a competitive advantage over

their competitors, need to build intangible resources. In the light of the resource-

based view and dominant logic (DL), this study is an endeavor in this regard and pro-

poses that DL and managerial capabilities are intangible resources, which can drive

the performance of small- and medium-sized enterprises (SMEs). We hypothesized

that dynamic managerial capabilities (DMCs), measured by human capital along with

social capital and managerial cognition, play a mediating role in the relationship

between DL, consisting of proactiveness and routine, and firm performance. The data

in this study were obtained through a survey from 204 SMEs in China and were ana-

lyzed by structural equation modeling to generate results. We found that while suc-

cessfully utilizing intangible/operant resources that are characterized as firm dynamic

capabilities, SMEs can achieve superior performance and competitive advantage. Our

results support the proposed hypotheses that show the importance and significance

of DL and DMCs in order to attain higher level of performance. The concept of DL

and its impact on SME's performance has been less researched in general, particularly

in China. Limited research is available regarding intangible resources and their impact

on SME performance in China.

1|INTRODUCTION

The competitive 21st century is evident with transition economies

characterized as transformation from centrally planned economies to

market economies/trajectories that undergo structural transformation

in practice. In transition economies, both existing and new firms are

lacking of capabilities, market power, and other valuable resources. In

order to face severe competition, firms should analyze their practices,

keenly seek for new techniques, develop their innovation capabilities

to act flexible, and increase their competitiveness (Bhuian, Menguc, &

Bell, 2005; Ireland, Hitt, & Sirmon, 2003). Such kind of characteristics

are interlink with the firm's performance in today's highly volatile busi-

ness markets, in which product, innovation, and business model life

cycles are shortened (Hamel & Ruben, 2000). Thus, firms need to

identify new opportunities on regular bases (Coimbatore K Prahalad &

Krishnan, 2008). Prahalad and Bettis (1986) argued that the way top

management deals with increasing variety of strategic decisions in a

firm, caused by either acquisitions or structural changes in the firm's

core businesses, is completely dependent on the cognitive orientation

of the top managers. In order to understand the complex relationship

between dominant logic (DL), organizational environment, and perfor-

mance, there is a need to add or modify some new elements as

changes occur in the environment (Obloj, Obloj, & Pratt, 2010). To

this end, authors discussed that dynamic capabilities positively influ-

ence firm performance (Wilden, Gudergan, Nielsen, & Lings, 2013); it

also improves interfirm performance and improves the usefulness,

Received: 25 June 2019 Accepted: 12 July 2019

DOI: 10.1002/pa.2002

J Public Affairs. 2019;e2002. wileyonlinelibrary.com/journal/pa © 2019 John Wiley & Sons, Ltd. 1of11

https://doi.org/10.1002/pa.2002

1

Department of Management Science, GIK

Institute Topi, Swabi, KPK Pakistan

Correspondence

Kashif Ullah Khan, Department of

Management Science, GIK Institute Topi,

Swabi, KPK Pakistan. Email: Kashifullah@giki.

edu.pk; kashif1@mail.ustc.edu.cn

J Public Affairs. 2020;20:e2002. wileyonlinelibrary.com/journal/pa © 2019 John Wiley & Sons, Ltd. 1of11

https://doi.org/10.1002/pa.2002