Moderating and Mediating Role of Dynamic Capabilities on Differentiation Strategy and SMEs’ Sustainable Performance

• Lawan Ibrahim

• Ibrahim Aliyu

• Wasilu Suleiman

• Suleiman A. Babagana

Small and Medium Enterprises are an essential driver of the economy, and their performance is imperative to national development. Performance and long-term survival have become a focal concern for many business owners as a result of stiff competition and environmental and social factors; thus, there is a paradigm shift in the study of performance. This study examines sustainable SMEs’ performance in an attempt to examine beyond profit as a holistic approach to performance. Among many SMEs, few incorporate the concept into the operation of the business, particularly in the context of Nigerian SMEs. The population of the study is six thousand and twelve (n=6,012) SMEs operating in the Northeast States of Nigeria, out of which three hundred and eighty-four (n=364) were selected using the Yamane formula and data were collected from (retrieved 325 copies) owners/manager for analysis. The findings revealed that the moderating effect of dynamic capabilities is found to be significant, and the direct influence on sustainable performance is also significant, indicating a substantial effect. However, the moderating effect increases when dynamic capability is greater compared to when dynamic capability is low. This revealed that the moderator also strengthens the relationship. This study extends understanding and importance of strategic moves that employ differentiation strategy and dynamic capabilities in a turbulent and competitive business environment. Therefore, SMEs’ managers/owner should incorporate differentiation strategy and dynamic capabilities as a source of competitive advantage. Although these results provide valuable insight, further research with larger samples and more complex models could provide a deeper understanding of the dynamics underlying the relationships.

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