Dynamic Capabilities, Business Strategy, Innovation and Performance of FMGC Campanies

Abstract

Majority of studies have been geared towards examining the critical role of business strategy, innovation and SMEs performance in Malaysia. Current studies, however, reported contradictory results on business strategy and innovation on financial performance in different contexts. Therefore, this study claims that there should be a moderating variable is required to promote the relationship between business strategy, innovation and organizational performance. This study, therefore, has incorporated the dynamic capabilities as a moderator to improve the relationship between business strategy (differentiation strategy and cost-leadership strategy), innovation (product innovation and process innovation) and financial performance. The study aims to describe the relationship of cost-leadership strategy, differentiation strategy, product innovation and process innovation on the financial performance under the moderating role of dynamic capabilities. To establish the proposed conceptual framework, two theories were introduced: resource-based view (RBV) and dynamic capabilities (DC). The recent literature was used to obtain information on the factors that enabled the present study to establish a conceptual framework and eight propositions formulated. The moderating effect of dynamic capabilities on business strategy (cost-leadership strategy and differentiation strategy) and innovation (product innovation and process innovation) are the main theoretical contribution. Furthermore, limitations and recommendations for future research presented.