How do SMEs Shape Business Model Innovation? A Digital Infrastructure, Improvisational, and Dynamic Capability Perspective

Abstract

Dynamic capabilities embody various capabilities that drive the organization’s adaptiveness and are studied from disciplines including management, organizational sciences, and information systems. However, the impact of dynamic capabilities manifested through management system adaptability, adaptive capability, and improvisational capabilities on business model innovation under tumultuous times still has to be unfolded for small to medium-scale enterprises (SMEs) in a developing country context. Therefore, this study investigates these capabilities’ role in Ghana’s SMEs during the COVID-19 crisis. Moreover, we investigate the role of a digital infrastructure capability that supports business connectivity and information exchange with business partners in strengthening the impact of improvisational and dynamic capabilities on business model innovation under COVID-19. Also, we propose that technological turbulence that erupted due to COVID-19 acts as a key contingent factor that positively moderates the relationship between business model innovation and the organizational performance of SMEs. Using an online survey, we obtained survey data from 105 SMEs sampled from the Greater Accra Region of Ghana and analyzed the data using partial least structural equation modeling (PLS-SEM). This study shows that dynamic and improvisational capabilities positively impact business model innovation. This study unfolds that business model innovation positively impacts organizational performance during the COVID-19 crisis. Moreover, our work shows that digital infrastructure capability is crucial in shaping dynamic and improvisational capabilities. This digital capability seems crucial to quickly adapt to the changing customer, technology, and competitor landscape during a pandemic. Finally, the analyses unfold that technological turbulence is a key moderating factor in the research model that strengthens the relationship between business model innovation and organizational performance. Hence, our results extend the current knowledge base of dynamic and organizational capabilities while offering various implications for practice. We also offer various practical recommendations that help overcome business model innovation challenges during tumultuous times.