Dynamic Capabilities and Firm Performance: A Case of Two SMEs in Pakistan

This paper investigates the inter-relationship among entrepreneurship, dynamic capabilities and innovation. Entrepreneur's foresights and insights of ICT (Information and Communication Technologies) tend to affect their choices of resources and development of dynamic capabilities, leading to different results of innovation. Based on the literature of business innovation and dynamic capabilities, this paper provides a model addressing the links between leadership, with insights and foresights for technology exploration and exploitation, and organizational capabilities of resource integration, learning and transformation to accelerate innovation. A comparative analysis of the two textile manufacturers in Pakistan revealed a cyclical process between the leadership decisions and dynamic capabilities of leveraging ICT for sustained competitiveness in these two SMEs (Small and Medium Sized Enterprises). The result suggests that to build strong capabilities for continuous innovation in today's dynamic business environment, firms need to have leadership with both the attitude and behavior of entrepreneurship, combining the foresight to capture opportunities through ICT and the insight to guide and manage internal resources to achieve ICT-enabled innovation.