Effect of Technology Capability on Business Performance: Does Strategic Flexibility Matter?

Abstract

Technology capability is widely recognised as an important driver of adaptation and business performance among small and medium sized enterprises, yet limited evidence explains how it produces value in resource constrained manufacturing environments. Grounded in dynamic capabilities theory, this study examined the direct relationship between technology capability and business performance and the mediating role of strategic flexibility among manufacturing SMEs. Survey data from owners and top-level managers were analysed using partial least squares structural equation modelling. The findings show that technology capability improves business performance directly and also strengthens strategic flexibility, which contributes positively to performance. Strategic flexibility therefore serves as a complementary mechanism through which firms convert technological knowledge, integration and deployment into timely strategic options and resource reconfiguration. The study refines dynamic capabilities theory by positioning technology capability as an enabling operational capability whose value is partly realised through a higher order reconfiguration process. Managers should combine technology investment with digital skills, modular processes, scenario planning and rapid resource redeployment, while enterprise support institutions should integrate technology upgrading with managerial capability development.