The Mediating Role of Innovation Capabilities in the Relationship between Dynamic Managerial Capability and Performance of Export-manufacturing Firms

Entrepreneurial export-manufacturing firms marshal and ultimately succeed when they better avail and align various capabilities. Dynamic managerial capability (DMC) refers to the individual-level capabilities of managers and entrepreneurs to reconfigure a firm’s resources and competencies in order to ultimately enhance firm performance. A firm’s strategic capabilities, including innovation capabilities, are often assumed to play a mediating role. Drawing upon DMC and dynamic capability theory, we test this assumption by examining 336 apparel export-manufacturing firms in Bangladesh. We found clear evidence for mediation relationships between two DMC attributes — managerial social capital and managerial cognition — and firm performance, where process and product innovation capabilities play a mediating role. In contrast, no link with innovation capabilities was found for a third DMC attribute investigated in this study, i.e. managerial human capital.