Dynamic capabilities and employee participation: The role of trust and informal control

Abstract While burgeoning research has shown the relevance of dynamic capabilities in terms of managers identifying and pursuing business opportunities, much less is known about the role of involving employees without managerial status in those activities. In this paper, we examine the impact of employee participation on the enactment of dynamic capabilities. The results of our survey-based linear regression analysis show that employee participation is positively related to the dynamic capabilities of a firm. Furthermore, we hypothesize and find that managers can facilitate employee participation through both trust in and informal control of subordinates. Our findings also suggest a positive relationship between informal control and dynamic capabilities, and point to employee participation as a mediator in the relationship between trust and dynamic capabilities. Our results extend the literature on dynamic capabilities by highlighting and demonstrating the important role of employee participation in identifying and pursuing business opportunities through dynamic capabilities as well as the relevance of trust and informal control therein.