The influence of dynamic capabilities on firm performance : examining the moderating role of government support in Ghanaian SMEs

Abstract

This study advances understanding of how Dynamic Capabilities (DC) influence Firm Performance (FP) among Small and Medium-Sized Enterprises (SMEs) in emerging economies, focusing on Ghana as a developing market context. While prior research has examined DC–FP relationships in advanced economies, this study uniquely explores the moderating role of government support in shaping this linkage within a resource-constrained environment. Using purposive sampling, data were collected through a three-phase approach involving online surveys, field interviews, and follow-up assessments, generating 298 valid responses from SME owners and managers. Structural Equation Modeling results reveal that sensing capabilities significantly enhance firm performance, while government support strengthens the positive relationship between integrating capabilities and firm performance. These findings underscore the critical role of government interventions in amplifying firms’ capacity to integrate knowledge and resources for improved outcomes. The study contributes to the dynamic capabilities literature by contextualizing the DC–FP nexus in an African SME setting and offers managerial insights into leveraging and integrating capabilities by sharing unique ideas across business units to enhance firm performance in turbulent environments.