The mediating effect of strategic orientation, innovation capabilities and managerial capabilities among exploration and exploitation, competitive advantage and firm’s performance

Abstract

This study employs a dynamic capability (hereafter DCs) perspective to examine the relationships among strategic orientation (SO), innovation capability (IC), managerial capabilities (MC) and exploration and exploitation capabilities on competitive advantage (CA) and firm’s performance. This paper proposes that the role of exploration and exploitation capabilities in these relationships differs between the three dimensions of strategy orientation (leadership cost-based strategies, and differentiation-based strategies and product-market scope) and performance. Modelling structural analysis was used to test the hypotheses in a sample of 387 Portuguese SME´s firms. The empirical findings indicate that innovation capability, managerial capabilities and strategic orientation positively mediate the relationship between exploration and exploitation capabilities and performance, whereas strategic orientation affects competitive advantage and performance. Finally, the study provides a discussion on the theoretical and managerial implications and directions for future research.