Conceptualizing a nexus between agility, unobserved differences of dynamic capability, and sustainable performance of microfirms

Abstract

Recent studies have highlighted commonalities in the relationship between dynamic capabilities and firms’ sustainable performance. However, the impact of unobserved differences within the dimensions of dynamic capabilities on firm-level sustainable performance remains unclear. Specifically, in this study, we investigate how unobserved variations in dynamic capabilities influence the sustainable performance of dairy microfirms. Additionally, the study examines the unobserved mediating effects of agility in the relationships between knowledge-sharing sensing capability, managerial cognitive capability, and sustainable performance. Grounded in the Knowledge-Based View (KBV) theory, our study rigorously tests these hypotheses using a unique quantile composite-based path modeling approach. The findings reveal both significant strong and weak unobserved differences in the relationships between knowledge sharing, sensing capability, managerial cognitive capabilities, agility, and the sustainable performance of microfirms. Notably, the results demonstrate that agility significantly mediates the unobserved dimensions of dynamic capabilities in supporting sustainable performance, with the study confirming both full and complementary partial mediation effects. Our findings offer a valuable framework for managers and employees to strategically invest in dynamic capabilities while also discussing the heterogeneous distribution of these capabilities among managers and employees across dairy microfirms.