The sequential effect of absorptive capacity, strategic agility, and sustainable competitive advantage on sustainable business performance of SMEs

A company’s environmental sensitivity primarily depends on its sustainability. Hence, investigating the factors that affect sustainable business performance contributes to the literature on the environment. Based on a resource-based view, dynamic capabilities, and contingency theory, this study examines the sequential relationships between the absorptive capacity, strategic agility, sustainable competitive advantage, and sustainable business performance of small- and medium-sized enterprises (SMEs), as well as the mediating role of sustainable competitive advantage in the relationship between strategic agility and sustainable business performance. The data for the study was collected from 421 SMEs operating as family businesses and analyzed using SEM. Research findings show that the sub-dimensions of absorptive capacity, acquisition, and exploitation affect strategic agility; strategic agility affects sustainable competitive advantage, and sustainable competitive advantage affects sustainable business performance. In addition to these sequential relationships, sustainable competitive advantage was found to play a full mediating role in the relationship between strategic agility and sustainable business performance. The findings of the study highlight the process to achieve sustainable performance for SMEs, which are the backbone of developing economies in today’s highly turbulent economic conditions.