The impact of dynamic capabilities on SME performance in a volatile environment as moderated by organizational inertia

Purpose – This paper aims to examine the influence of the dynamic capabilities of small and medium enterprises (SMEs) on organizational performance, and the interaction between dynamic capabilities and organizational inertia in a volatile environment. Design/methodology/approach – A quantitative survey was carried out in Lithuania's SME sector. In order to achieve the aim of this empirical research, a sample of 360 SMEs was analyzed. Findings – This exploratory study offers a conceptual model for dynamic capabilities and organizational inertia in a volatile environment. The findings suggest that dynamic capabilities have positive effects on non-financial relative organizational performance, though no impact on financial relative organizational performance has been revealed. The authors argue that organizational inertia moderates dynamic capabilities and relative organizational performance. Research limitations/implications – One suggestion for further research is to investigate the interaction between dynamic capabilities and organizational inertia in a stable environment and to perform longitudinal research embracing a broader sample of organizations. Originality/value – The study addresses a gap in strategic management literature and practice, examining the interaction between SME dynamic capabilities and organizational inertia in a volatile environment during an economic crisis.