Unlocking SME success: optimizing capability development amidst dynamic market conditions in emerging economies

Abstract

Purpose The business landscapes in Asia and Africa are predominantly characterized by small and medium enterprises (SMEs) facing significant resource constraints. Understanding the capability dynamics of these enterprises in such contexts carries significant implications for theory and practice. This paper aims to addresses a crucial question of whether increasing customer involvement capability consistently yields the necessary rent for enterprises operating under resource constraints in emerging markets in Asia and Africa. By investigating this question, the paper offers SMEs a more nuanced approach to capability development, enabling them to achieve better returns on their investments. Design/methodology/approach To ensure the robustness of the findings, data were collected from SME service firms operating in two emerging economies: India (Asia) and Ghana (Africa). Data were collected in two waves to allow for catering to specific environmental conditions not accounted for in the study. Two-stage data analysis was then conducted to test the hypothesized relationships across the two countries. Findings The findings reveal that customer involvement capability does not always lead to an increase in firm-level competitiveness, and the effect follows an inverted U-shaped pattern. However, the nature of this relationship varies under different market conditions in both contexts. Specifically, in periods of low customer demand and intense competition, the relationship is linear and positive. On the other hand, in periods of high demand and competition, the relationship becomes inverted U-shaped, returning to a direct relationship with firm-level competitiveness. Originality/value This paper provides a resolution to the critical issue of whether customer involvement capability consistently delivers firm performance benefits, particularly for resource-constrained SMEs in emerging markets. By explaining how SMEs in emerging markets can fully capitalize on their capability development to optimize their resources, this paper makes a distinctive contribution. Moreover, it sheds light on the importance of aligning involvement capabilities with prevailing market conditions for SMEs to reap the maximum benefits.