Dynamic Capabilities of SMEs: The Contributions of Bricolage and Social Capital.

Abstract

Objective: Dynamic capabilities are defined as “the firm’s ability to integrate, build, and reconfigure internal and external competences to address rapidly changing environments” (Teece et al., 1997, p. 516). In doing so they create value, derived from the capacity of a management team to identify opportunities and threats and reconfigure a firm’s repertoire of resources and operations to address them (Teece, 2007). While there is agreement that dynamic capabilities facilitate a firm’s competitiveness; there remains a lack of clarity around the notion and complexity surrounding the way in which they evolve (Eriksson, 2014). This, in particular, has created difficulties in identifying valid measurement tools to appraise their creation and deployment leading to the extant literature to rely upon qualitative, often longitudinal, case studies to analyse the phenonoma (Wang and Ahmed, 2007, Barreto, 2010, Eriksson, 2014). While previous research has investigated the dynamic capability concept in relation to its antecedent factors, the characteristics integral to their implementation, potential outcomes and influences upon competitive advantage and performance of firms (Zott, 2003, Song et al., 2005, Zuniga-Vicente and Vicente-Lorente, 2006, Wang et al., 2015). There is limited evidence available that examines the contribution made by the bricolage and social capital of management teams to the generation and use of dynamic capabilities. Literature review: It is suggested that the dynamic capabilities of SMEs originate from the often ad-hoc approaches to problem solving (Winter, 2003) and learning that results from the need to reconfigure resources and routines to address challenges (Prashantham and Floyd, 2012). This activity supports the development of soft assets - values, culture and experience – that underpin a firm’s dynamic capabilities and inform future learning processes adopted by management teams (Corner and Wu, 2012). The process, therefore, is associated with a firm’s resource-based changes, which include the improvement of existing capabilities and the development of new capabilities (Prashantham and Floyd, 2012). As indicated this is often ad hoc and achieved through trial-and-error and improvisation (Ahuja and Lampert, 2001, Miner et al., 2001), such learning has the effect of embedding capabilities into the DNA of a firm (Teece, 2007, Argote and Ren, 2012, Prashantham and Floyd, 2012). Changes in the dynamic capabilities of firms are the result of the learning that takes place within a management team during the process of improvisation and experimentation within the existing resource base (Hambrick and Mason, 1984, Martin, 2011, Kor and Mesko, 2013). It is argued that social capital is one mechanism for acquiring, assimilating and exploiting external knowledge and resource to transform a firm’s capability over time (Zahra and George, 2002, Le Breton-Miller and Miller, 2006, Prashantham and Young, 2011). Although Nemanich et al. (2010) have argued that social capital can overload and delay processes that create solutions; we propose that the social capital of a management team positively influences the development and appropriation of a firm’s dynamic capabilities. Bricolage helps create new from old and “something from nothing” (Baker and Nelson, 2005, p. 357) that lead to the strategic development of diverse, non-specialized resources (Gurca and Ravishankar, 2016). Those redifined resources at hand are appropriated through learning processes that are both improvisational (performative) and experimental (ostensive) (Weick, 1998, Baker, Miner and Eesley, 2003, Kreiser, 2011); and the outcomes are integrated into building dynamic capabilities. Method: This study is distinct from previous research as it employs a quantitative method and constructs a new multidimensional dynamic capability measurement by aggregating definitions, analysis and suggestions from previous literature to establish and test hypotheses (Teece, 2014). This measurement is validated by using the confirmatory factor analysis method before being utilized to examine a research framework. While early literature perceived social capital to be a unidimensional concept (Burt, 1992) this paper takes a more multidimensional perspective as posited by Adler and Kwon (2002), and employs a three-dimension approach, measuring relational, structural and cognitive social capital; first introduced by Nahapiet & Ghoshal (1998); and validated in later works (Karahanna and Preston, 2013, Huynh, 2016). To measure the bricolage of a management team, we employ a measurement constructed and validated by prior researchers (Davis et al., 2013, Senyard, Baker, Steffens and Davidsson, 2014). Hypotheses are tested and findings presented using data drawn from 274 SMEs in the UK. Structural equation modelling (SEM) is used to test the research hypotheses. This entails a two-stage approach; a measurement model using confirmatory factor analysis (CFA) to examine the validity and reliability of measurements, and a structural model to test the relationships among latent variables (Byrne, 2010). Findings: The results indicate support for all hypotheses; the social capital of management teams has a significant positive impact on the dynamic capabilities of SMEs. There is a significant positive link between the bricolage of management teams and the dynamic capabilities of SMEs and the social capital of management teams has a significant positive influence upon the bricolage of management teams. The results show that the mutual connections between social capital and bricolage, bricolage and dynamic capabilities, and social capital and dynamic capabilities are significantly positive. Values: This study addresses the gap in the literature and examines the influence that the social capital and bricolage of management teams have upon the the development of dynamic capabilities witin SMEs. We build on insights into the antecedents of dynamic capabilities in the context of resource-constrained firms through the deployment of bricolage and social capital, (Nahapiet and Ghoshal, 1998, Baker and Nelson, 2005) and enhance this using fine-grained analyses to analyse how SMEs and their management teams learn through bricolage and each element of social capital contribute to the generation and appropriation of all three sub-sets of of dynamic capabilities; sensing, seizing and reconfiguring.