Impact of Dynamic Capabilities on Egyptian Industrial Firm’s Performance: The Role of Operational Capabilities and Environmental Dynamism

Abstract

Business organizations, especially the industrial ones, face many challenges that affect their financial and non-financial performance. This study opines that business organizations need to strengthen their dynamic capabilities in order to achieve superior performance and sustainable competitive advantage. Dynamic capabilities with its impact is a major tool that enables organizations in general to draw the right paths to activate their practical and operational movement within the environment in which they live and interact with it in order to achieve the desired goals and progress in their competitive business environments. This study focuses on investigating the relationship between the dynamic capabilities and its impact on firm’s performance of the Egyptian industrial companies, indicating the mediating role which is played by the operational capabilities in this relationship, and also investigating the moderating effect of the environmental dynamism on the relation between the dynamic and operational capabilities of those companies. The study is intended to achieve numerous objectives such as: identify the direct and indirect effects of dynamic capabilities on the Egyptian industrial companies' financial and non-financial performance, specify the direct effects of operational capabilities on the Egyptian industrial companies' financial and non-financial performance, and determine the most influential dynamic and operational capabilities affecting the Egyptian industrial companies' financial and non-financial performance. The importance of this study emerges from the fact that no previous research examined this field from the Egyptian point of view. This study followed the quantitative methodology to describe and explain the impact of the dynamic capabilities on the Egyptian industrial companies’ performance. The conceptual framework is supported by results derived from the literature review. The empirical analysis were carried out in the industrial companies in Egypt. As a result of responses from 284 industrial companies representing wide range of industries. Data is collected based on questionnaire-based survey targeting upper level managers of those companies in Egypt. Analysis was conducted using AMOS in Structural Equation Modeling (SEM).The study reached a number of findings, the most important are: the study confirms the indirect impact of dynamic capabilities on the firm performance of the Egyptian industrial companies through the impact of the operational capabilities (the mediator variable), the results also show that dynamic capabilities have a direct impact on the firm performance of the Egyptian industrial companies in case of the absence of the mediator variable. This study finds that environmental dynamism negatively moderates the relationship between the dynamic capabilities, and the operational capabilities, and not enhanced this relation. In addition making a conceptual contribution to the dynamic capabilities theory, the findings also provide Egyptian managers with practical understanding and insights about the role of the dynamic capabilities in enhancing Egyptian industrial firm’s performance. Despite the importance of the results reached by this study, more in-depth research and studies are recommended to be conducted across different firms, levels of management, and sectors of the economy.