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Building dynamic capabilities of small and medium-sized enterprises through relational embeddedness: evidence from China

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Abstract

In a highly volatile environment, i.e., the bottom of the pyramid (BOP) context, small and medium-sized enterprises (SMEs) can develop and adapt their resource bases through partner relations, extending the emerging theorization of dynamic capabilities. We explore the detailed nature and antecedents of these dynamic capabilities based on a multicase study by tracing the development of 6 BOP-oriented SMEs in the pharmaceuticals, animal husbandry, agricultural product processing, and distribution fields. The research was conducted between June 2019 and November 2020. First, our rich qualitative data indicate two distinct types of dynamic capabilities that are pivotal for short-term performance advantage and sustainable competitive advantage. Adaptation dynamic capability relates to activities of resource deployment and renewed operational capability, which is supported by local legitimacy and trust mechanisms, constructed by strong ties with noncommercial partners. Shaping dynamic capability relates to activities of path-creation and innovation capability, which is supported by the heterogeneous information and cost advantages, generated by weak ties with commercial partners. Second, SMEs give priority to the development of adaptation dynamic capability as the basis of shaping dynamic capability, while their sequencing explains how SMEs create, leverage, and enhance them over time.

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Author notes

  1. Yina Zhang and Wu Zhao have contributed equally to this paper.

Authors and Affiliations

  1. School of Economics and Management, Xidian University, No.266 Xinglong Section, Xifeng Road, Xi’an, 710126, Shaanxi, China

    Yina Zhang & Jiancheng Long

  2. School of Marxism, Xidian University, No.266 Xinglong Section, Xifeng Road, Xi’an, 710126, Shaanxi, China

    Wu Zhao

Authors
  1. Yina Zhang
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  2. Jiancheng Long
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  3. Wu Zhao
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Corresponding author

Correspondence to Wu Zhao.

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Appendix A

Appendix A

Interview Guidelines

Questions serve as a guide for the conversation. They were not always formulated as they are presented here nor were asked in the same order.

  1. 1.

    Initiative description:

    1. A.

      Please provide a general description of how firms enter the BOP market? What are the antecedents/drivers (Internal and/or external factors)? What barriers affected the entering and how were they overcome? Please characterize.

  2. 2.

    Process and activities:

    1. B.

      What milestones or innovations are there in this market? Who was involved in the innovation process (Individuals, Teams and Institutions etc.)?

    2. C.

      What is the process by which these innovative activities are implemented and what are the results? Who are the partners and in what form are they cooperating? How does each party play a role in innovation activities?

  3. 3.

    Effects:

    1. D.

      Which partners do you think play a more important role in innovation activity A?

    2. E.

      Why innovation activity A needs X to participate? Do you consider in this innovation process X was different to Y? Why?

    3. F.

      How does the cooperation X affect the capability of the firm in the BOP context?

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Zhang, Y., Long, J. & Zhao, W. Building dynamic capabilities of small and medium-sized enterprises through relational embeddedness: evidence from China. Electron Commer Res 23, 2859–2906 (2023). https://doi.org/10.1007/s10660-022-09579-z

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  • DOI: https://doi.org/10.1007/s10660-022-09579-z

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