Importance of dynamic managerial capabilities on the performance of small family businesses

This research aims to determine how a chief executive officer’s (CEO) level of dynamic managerial capabilities (DMCs) influences the performance of small family firms, as well as how family involvement moderates this relationship. Additionally, this paper offers insights into one antecedent of CEOs’ DMCs, namely managerial human capital. A total of 213 observations were obtained from CEOs who have founded and operate a minimum of one small family firm in Mexico. After testing the hypotheses using a structural equation model, a positive relationship was found between the level of a CEO’s DMC and family-firm performance. It was further observed that family involvement in the firm could positively moderate DMCs’s effect on firm performance, where family involvement was calculated as the number of family members that work in the family firm independently, formally, or informally, as well as whether they work full-time or part-time. Overall, the results indicate that in small family firms, the ability to change and adapt to create a sustainable competitive advantage depends, to some degree, on certain types of individual capabilities (DMCs), rather than simply on organizational capabilities, known as dynamic capabilities (DCs).