Dynamic capabilities and SME performance in the COVID-19 era: the moderating effect of digitalization

Due to the adverse impact of COVID-19 on businesses, this study investigates how dynamic capabilities could influence SME performance through digitalization as a moderator in an emerging market.

A quantitative research approach was adopted, where a cross-sectional survey design was employed to collect the data from 400 SME managers and supervisors in Ghana. Using Statistical Package for Social Science, the data was analyzed through descriptive statistics, correlation and hierarchical regression techniques.

The results reveal that the dynamic capabilities (sensing, seizing and transforming) distinctly positively affect SME performance. Furthermore, digitalization significantly augments the relationship between the three dynamic capabilities and SME performance. However, digitalization could only significantly moderate the relationship between transforming capability and SME performance.

The findings imply that digitalization strategies (such as constant inclusion of digital analytics, digital operations, digital marketing and sales, digital ecosystem, and digital products and services) must be part of the transforming process to enhance the impact of the dynamic capabilities on SMEs performance.

This study contributes to the extant literature by establishing the effectiveness of digitalization as a moderator on the relationship between transforming capability and SME performance in the new world of COVID-19.