Importance of dynamic managerial capabilities on the performance of small family businesses

Abstract

This research aims to determine how an entrepreneurial chief executive officer's (ECEO) level of dynamic managerial capabilities (DMCs) influences the performance of small family firms, as well as family firm governance structure moderates this relationship. Additionally, this paper offers insights into one antecedent of ECEOs' DMCs, namely managerial human capital. A total of 213 observations were obtained from ECEOs who have founded and operate a minimum of one small family firm in Mexico. After testing the hypotheses using a structural equation model, a positive relationship was found between the level of an ECEO's DMC and family firm performance. It was further observed that family governance structure in the firm could positively moderate ECEO DMCs's effect on firm performance, where family governance structure was calculated as the number of family members that work in the family firm independently, formally, or informally, as well as whether they work full-time or part-time. Overall, the results indicate that in small family firms, the ability to change and adapt to create a sustainable competitive advantage depends, to some degree, on certain types of individual capabilities (DMCs), rather than simply on organizational capabilities, known as dynamic capabilities (DCs).