Environmental Dynamism, Trust and Dynamic Capabilities of Family Businesses

Abstract

Purpose – Dynamic capabilities are regarded as the bedrock of firms that survive in a dynamic environment. Notwithstanding this perspective, little research has been implemented in understanding dynamic capabilities of family firms. This paper aims to investigate the relationship between environmental dynamism and dynamic capabilities of family businesses, and the moderating effect of trust on this relationship. Design/methodology/approach - A quantitative survey was executed with the sampling frame outlined based on the Hemscott Company Guru database. 137 useful responses were employed in this study. Findings – The results suggest that environmental dynamism is an antecedent of dynamic capabilities. Furthermore, findings show the presence of trust moderates the environmental dynamism-dynamic capabilities nexus. Research limitations/implications - The cross-sectional design of the study determines that it can only proffer a snapshot of the scenario. In addition, the exclusion of non-incorporated firms in the sample because of the nature of the Hemscott database constrains the generalisability of the study. Future studies in a similar vein may be implemented through national/local development agencies to overcome this barrier. Originality/value - The unique intertwined family and business system embedded in family firms has led to the assumption that trust will influence the environmental dynamism-dynamic capabilities nexus. The current study confirms this assumption and offers a perspective that helps appreciate the environment-business relationship in family businesses.