Examining the Impact of Dynamic Capabilities on the Financial Performance of Manufacturing Companies

Abstract

This study tries to empirically investigate the effect of dynamic capabilities on manufacturing companies' financial performance by concentrating on three main dimensions: integration, learning, and reconfiguration capabilities. By adopting a lower-order construct approach, this research work clarifies the direct impact of dynamic capabilities on the financial performance. The data from 216 manufacturing companies in Dakshina Kannada, Karnataka, India, were collected and Partial Least Squares Structural Equation Modeling (PLS-SEM) was used for analysis. The results demonstrated that all three capabilities positively affect the financial performance of the manufacturing firms. Furthermore, the IPMA analysis indicated that reconfiguration capability is relatively more important but, but its performance is lower compared to integration and learning capabilities among the manufacturing companies. The results of this study offer insights into the critical role of dynamic capabilities in advancing firm performance. Furthermore, it contributes to the present literature by confirming that dynamic Capabilities directly affect firms' performance when assessed as a lower-order construct.