This paper reviewed past literature with the aim of establishing the trends in published literature on dynamic capabilities, entrepreneurial orientation (EO) and business performance of Small and Medium Enterprise’s (SMEs). Based on this review the relationship between dynamic capabilities, entrepreneurial orientation and business performance of SMEs is hinged on Schumpeter theory of innovations, (Schumpeter, 1942) and dynamic capability theory by Teeceet al (1997). Scholars have a common view that the association between EO and business performance is too complex hence moderated by variables. Dynamic capabilities (DC) have a moderating role between predictors of competitive advantage and business performance. The literature reviewed therefore presents the empirical studies globally and locally on moderation of dynamic capabilities on EO and business performance of SMEs. From the review it has been established that there are inconsistent findings in terms of relationships between DCs, EO and performance of SMEs which is justified by the fact that DCs, EO dimensions vary independently and may not be equally valuable across performance metrics or different stages of development of SMEs, besides different situations impacts on the relationship between DCs, EO and business performance of SMEs. In addition there is a dearth of literature on the moderating effect of dynamic capabilities on the relationship between EO and business performance thus calling for further interrogation in the context of developing countries. In conclusion there are mixed results in the linkage between EO and business performance, however effective integration and implementation of EO and DC would help the organization secure competitive advantage in the face of dynamic business environment to foster high business performance.
The dynamic business environment is ingrained with high levels of competition eulogizing the need for salient functional strategies to stay afloat. Thus, the management of the manufacturing industry must formulate and implement functional strategies which would guarantee their competitiveness. However, after years of policy mending through strategic framework and government interventions the sugar factories in Kenya are still under- performing with low productivity culminating to low competitiveness and massive indebtedness within the industry. It is in this regard that the study was designed to assess the effect of functional strategies such us financial, marketing, production, human resources on competitiveness of sugar industries in western Kenya as moderated by government interventions. The study relied on institutional theory, Porters generic theory and resource-based view theories. In a bid to effectively achieve this, the study adopted a cross-sectional study design based on samples drawn from across the sugar industry in western Kenya. The study relied on all heads of departments and supervisors of all the five sugar firms which are 98 purposively selected. Data was collected by use of a questionnaire from the respondents and analyzed by use of both inferential and descriptive statistics using SPSS version 25. From the study findings correlations among the functional strategies and competitiveness were significant. With a moderator the variables jointly explained 66.6% (R2= 0.666) variation in competitiveness of sugar industry with a significant F change at ρ<.05. In conclusion government intervention significantly influences the relationship between functional strategies and competitiveness of sugar industry. The management of sugar industry should formulate and implement functional strategies in line with government interventions to effectively enhance their competitiveness.
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