Impact of Dynamic Capabilities on Performance in Dairy Sheep Farms in Spain

This study links the dynamic capabilities (DCs) theory with performance in dairy sheep farms in Castilla La Mancha (central Spain). The approach is novel as it seeks to understand how best results can be achieved by deploying DCs in farms. The proposal is that dynamic capabilities are interrelated to each other and present a positive impact on the farm's economic sustainability. A mixed methods approach (a combination of qualitative and quantitative methods of research) was utilized. First, 30 indicators of dynamic capabilities (8 of absorption, 11 of integration, 9 of innovation, and 2 of profits) were selected by applying Delphi's methodology. Second, a structural equation model (SEM) was applied over a random sample of 157 dairy sheep farms to measure the relationship between DCs and the impact of each capability on farms' final performance. The existence of positive relationships amongst absorption, integration, and innovation capabilities was evidenced. Absorption and integration capabilities exhibited positive influences on a farm's final performance. The knowledge of the relationships amongst dynamic capabilities is a new orientation to increase farms' viability. These findings reveal that the application of the dynamic capabilities theory can explain best farms' economic sustainability.