Influence of Dynamic Capabilities on Competitive Advantage of Small and Medium Enterprises in Nairobi City County, Kenya

Abstract

Dynamic capabilities are primary drivers of a firm’s competitive advantage and thus of key interest to managers. Yet the way in which dynamic capabilities secure the competitive advantage for SMEs has received little empirical attention. This study set out to uncover the influence of dynamic capabilities on the competitive advantage of SMEs in Nairobi City County, Kenya. Dynamic Capabilities Theory and Industrial Organization Theory led the investigation. Three hundred and eighty-eight respondents were randomly selected from a population of nine thousand small and medium-sized enterprises (SMEs). Participants filled out a questionnaire, which was then evaluated using descriptive statistics and simple linear regression. As a consequence of the study, SME competitive advantage was positively impacted by social dynamic capacities. This led to the conclusion that dynamic capabilities, such as the capacity to recognize opportunities, integrate and reconfigure resources, processes and routines are important to the competitive advantage of Nairobi City County, Kenya's small and medium-sized enterprises (SMEs). SME owners are advised to assess market developments in a methodical manner and implement these insights into their company operations, according to the findings of this research. By taking into account both the diverse capability configurations revealed in this study and the aims of SME owners, public policy aimed at promoting SME growth should also be structured to achieve more precise strategic goals.