Strategic goal interdependence approach to dynamic capability and the effects of customer integration and market dynamism: evidence from China

Abstract

Based on the theory of cooperation and competition, this study proposed goal interdependence with downstream company as an important enabler of firms' dynamic capability. Moreover, we examined both how and when cooperative and competitive goals affect dynamic capability by considering customer integration as a mediator and market dynamism as an important contingency. We tested our moderated mediation model by using survey data from a cross-industry sample of 233 firms in China. Results of structural equation analyses suggest that firms and downstream companies that recognize strategic goal interdependence as cooperation rather than competition develop customer integration. With customer integration, firms' dynamic capability is promoted. Additionally, the moderated mediation analysis revealed that the positive indirect relationship between cooperative goal and dynamic capability with the linkage of customer integration is weaker for higher levels of market dynamism, but the negative indirect effect of competitive goal on the dynamic capability through customer integration does not depend on market dynamism. Based on these findings, we discussed how our findings extend dynamic capability research, the theory of cooperation and competition and provide implications for practice. ARTICLE HISTORY

Managerial capabilities and firms' sustainable performance: Evidence from Chinese manufacturing small and medium-sized enterprises

“…In the words of Hung and Chou [30] market dynamism (turbulence) is explained by how customer demand and preference vary rendering a concern's current market knowledge obsolete. Yang and Gan [31] clarify that the same concept results from variability in technology, price, product availability, and support services. Market dynamism may pose a certain degree of risk to firms as it makes it more difficult for managers/owners in managing their firms while having to figure out the future accurately.…”

“…Furthermore, in such highly turbulent environments, the situation might render the firm ineffective and inefficient to adapt to the circumstance, albeit customer integration can aid the firm to access information such as product price, market needs, and customer expectation from downstream organization [33]. This can be contrasted with the situation in which the firm faces stable market environment being subjected to less ambiguous circumstances can help the company visualize the whole situation of the market [31].…”