Entrepreneurial competencies and small firm performance: the mediating effect of dynamic capabilities

Small firm, an effective tool for employment generation and economic development, has gained the attention of practitioners, governments and academicians across the world. The performance of small firm depends on various factors such as entrepreneurial competencies and dynamic capabilities. Although the literature confirms the significant effect of entrepreneurial competencies and dynamic capabilities on firm performance, however, there is still a lack of studies on how dynamic capabilities integrate, reconfigure and coordinate intangible resources to determine small firm performance. This study examines the nature of the relationship that exists between entrepreneurial competencies and small firm performance in the surgical instruments manufacturing sub-sector of Pakistan. The study, then, examines the second main objective, the mediating role of dynamic capabilities on the relationship between entrepreneurial competencies and small firm performance. Data were collected from the small firms of the surgical sector, which are members of the surgical instruments manufacturers association of Pakistan (SIMAP). Cross-sectional survey was employed where questionnaires were personally-administered to collect data from the entrepreneurs/owners-managers of small firms. The study adopted simple random sampling and 296 usable data were gathered to determine 37 direct and indirect hypotheses developed to address the research objectives. The Partial Least Squares Structural Equation Modelling (PLS-SEM) was used to analyze the data. Generally, the results support the view that the dimensions of entrepreneurial competencies and dynamic capabilities effectively foster small firm performance. The findings also reveal that dynamic capabilities as significant mediator on the relationship between entrepreneurial competencies and small firm performance. The findings have value for Pakistan as this sub-sector contributes significantly to the national economy and similar studies are generally scarce. Moreover, the study suggests for the use of the research framework for future works that lead to strategic planning that shall improve the underperforming of small surgical instruments manufacturing firms in Pakistan.