Dynamic capabilities and responsiveness: moderating effect of organization structures and environmental dynamism

Abstract

Resource-based view suggests that dynamic capability is a very powerful resource to improve the firm’s responsiveness in the fast-changing environment. Additionally, organization structures may decrease or increase the effect of dynamic capabilities by providing greater or lesser opportunities. Consequently, this study examines the direct impact of dynamic capabilities on the firm’s responsiveness as well as the moderating effect of organization structures and environmental dynamism on the dynamic capabilities–responsiveness relationship. Using the moderated hierarchical regression method, we analyzed 217 data points collected from Indian service companies to test our hypotheses. The findings suggest that dimensions of dynamic capability: sensing, learning, integration, and reconfiguration capability have significant positive impact on the firm’s responsiveness. The statistical results also suggest that the dynamic capabilities–responsiveness relationship is moderated by the organization structures and environmental dynamism. Moderation results explain that the firm responsiveness is expected to improve if (1) they have strong sensing capability and adopt a less formalized organization structure; (2) they have strong learning capability and a more centralized organization structure; (3) they have a high level of reconfiguration capability and adopt a less specialized organization structure; and (4) they deal with a highly dynamic environment and have a strong sensing capability. The originality of the study lies in exploring the internal alignment with organization structures and external fit with environmental dynamism on the relationship between dynamic capabilities and firm’s responsiveness.