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Asian Social Science; Vol. 20, No. 5; 2024
ISSN 1911-2017 E-ISSN 1911-2025
Published by Canadian Center of Science and Education
14
Proposed Study on the Existing Body of Literature on Innovation
Performance in China’s High-Tech SMEs
Xing Yang1, Yeoh Khar Kheng1 & Abdul Rahman Jaafar1
1 School of Business Management, Universiti Utara Malaysia, Malaysia
Correspondence: Yeoh Khar Kheng, Senior Lecturer, School of Business Management, University Utara,
Malaysia, 06010 Sintok, Kedah, Malaysia. E-mail: kharkheng@uum.edu.my
Received: July 21, 2024 Accepted: September 7, 2024 Online Published: October 1, 2024
doi:10.5539/ass.v20n5p14 URL: https://doi.org/10.5539/ass.v20n5p14
Abstract
This study investigates the intricate relationship between top management capability, relational capability,
technological capability, learning capability, innovation strategy, and innovation performance within the context
of high-technology Small and Medium Enterprises (SMEs) in China. Through a synthesis of the Resource-Based
View and Dynamic Capability Theory, this research delves into how these diverse capabilities intersect to shape
innovation outcomes in a rapidly evolving market landscape. Drawing upon empirical data collected from a
comprehensive sample of high-tech SMEs operating across various industries in China, this study examines how
top management capability influences the firm's strategic direction and innovation agenda. Furthermore, the
research explores the role of relational capability in fostering collaborative relationships with stakeholders, such
as customers, suppliers, and partners, to access valuable resources and knowledge for innovation initiatives.
Moreover, the study investigates how technological capability enables firms to harness advanced technologies
and expertise to drive innovation, while learning capability facilitates the absorption, assimilation, and
application of new knowledge and insights to fuel continuous innovation efforts. Through an analysis of
innovation strategies adopted by high-tech SMEs and their alignment with dynamic capabilities, this research
elucidates the mechanisms through which firms leverage their diverse capabilities to formulate and execute
effective innovation strategies, ultimately impacting innovation performance. The findings contribute to both
theoretical understanding and practical implications, providing insights for high-tech SMEs in China on how to
develop and leverage dynamic capabilities across multiple dimensions to enhance innovation performance and
achieve sustainable competitive advantage in today's dynamic business environment.
Keywords: Top management capability, relational capability, technological capability, and learning capability,
innovation strategy, innovation performance, high-tech SMEs, China
1. Introduction
Many governments, including China, have implemented policies and incentives to support innovation. SMEs
aligning their strategies with these policies can benefit from grants, subsidies, and other support mechanisms
(Chinese Statistics Year Book, 2016). Innovation can lead to the development of sustainable and environmentally
friendly products and practices (Rajapathirana & Hui, 2018). This aligns with the growing global emphasis on
environmental responsibility and can enhance a company's reputation. Investors often seek opportunities in
innovative and high-growth enterprises (Azar & Ciabuschi, 2017). SMEs focusing on innovation may find it
easier to attract funding from venture capitalists, private equity, and government-backed initiatives. Innovation
often thrives in collaborative environments. SMEs that actively participate in industry ecosystems, collaborations
with research institutions, and partnerships with other businesses can amplify their innovative capabilities (Azar
& Ciabuschi, 2017). As it works to build an environment that promotes their expansion, China aims to have more
than 200,000 high-tech SMEs by the end of 2025 (Council on Foreign Relations, 2019). The goal of the
government's ten-year Made in China 2025 strategy is to rapidly create ten high-tech industries to modernize
China's industrial base. The top three of these include advanced robotics and artificial intelligence,
next-generation IT and telecommunications, and electric cars and other alternative energy vehicles, according to
the Council on Foreign Relations (2019). According to the Council on Foreign Relations (2019), further
significant industries include high-tech maritime engineering, advanced electrical equipment, novel synthetic
materials, growing biomedicine, high-end rail infrastructure, and agricultural technology. The incorporation of
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emerging technologies such as cloud computing and big data into international manufacturing supply networks is
known as the "fourth industrial revolution," and these industries play a crucial role in it (Council on Foreign
Relations, 2019).
However, over the past 20 years, as strategic importance has grown, firms' innovation toolkits have significantly
expanded to include cutting-edge concepts like open innovation and design thinking (Ma, Guo, Shen, 2019;
Fernandes, Ferreira, & Peris-Ortiz, 2019). This has opened new opportunities for firms to elevate their level of
innovation (Leavy, 2019) and outrival their competitor (Chen & Kitsis, 2017). According to Expósito,
Fernández-Serrano, & Liñán (2019), innovation in this scenario offers SMEs entrepreneurs a chance to enhance
their performance in the Schumpeterian logic and market position. Therefore, innovation is currently one of the
most popular management buzzwords in both public and commercial enterprises. However, corporate
organizations need to have an effective innovation strategy to innovate effectively (Kafetzopoulos & Skalkos,
2019; Ma et al., 2019). Thus, in this fiercely competitive globalized world, China's high-tech SMEs have a
chance to enhance their innovation performance and competitive position by implementing an efficient
innovation strategy (Oliva et al., 2019). Thus, to improve company performance, the firm's critical ability to
strategically integrate its operational resources and capabilities with business processes has been identified as
entrepreneurial core capabilities and managerial dynamic capabilities (Guo et al., 2019). Because of this,
capabilities—as opposed to regular physical resources—indicate a company's ability to use its resources and
maximize its potential to improve company performance (Lu, 2020; Guo, 2019; Guo et al., 2019; Ma et al., 2019;
Acar & Zehir, 2009). This study operationalizes entrepreneurial core competencies as encompassing (i) top
management competence (TMC) and (ii) relational capability (RC), based on the challenges presented impacting
the performance of China high technology SMEs and the existing literature. As for managerial dynamic
capabilities, it encompasses (i) technological capability (TC) and learning capability (LC). Both 2 constructs
(which consists of total four variables) as pivotal capabilities to influence the innovation strategy, that in turn
affect the innovation performance of high-tech SMEs in China.
2. Problem Statement
China's SMEs are essential to innovation and economic success in the fast-paced global high-tech sector. The
success of these enterprises heavily relies on their ability to formulate and execute effective innovation strategies.
The organizational qualities that are ingrained in the organization capability in domain like top management,
relational, technological, and learning, are among the primary factors that determine the success of innovation. It
is crucial to comprehend the complex interactions between these capacities to promote innovation high-tech
SMEs in China. SMEs in China’s high-tech realm operate in a competitive environment characterized by rapid
technological advancements, global market integration, and a constant need for innovation. Despite their
significance, many SMEs face challenges in navigating this complex landscape and leveraging their capabilities
to drive innovation effectively. a large body of empirical research has connected the ideas of entrepreneurial core
capabilities (top management capability, relational capability) and managerial dynamic capabilities
(technological capability, and learning capability) with firm performance in multiple settings and contexts. But
many studies were concentrated in firm’s performance and not firm’s innovation performance, as well as in
Small & Medium Enterprises setting, not high-technology SME; notably in China context. Moreover, this study
bundles a suite of four concepts (TMC, RC, TC & LC) in a coherent manner to explicate the nuanced meaning of
entrepreneurial core capabilities and managerial dynamic capabilities. In addition, the past studies on innovation
strategy had always positioned it as either independent variable or dependent, but in this study, the researcher
pivoted it as mediator, which is the theoretical contribution of this study.
3. Research Objectives
The purpose of this study is to investigate how China's high-tech SMEs' innovation performance is influenced by
the entrepreneurial core capabilities (top management capability & relational capability) and managerial
dynamic capabilities (technological capability & learning capability). Furthermore, the goal of this study is to
examine how innovation strategy functions as a mediator between the performance of innovations and the
strategic abilities of top management, relationships, technology, and learning. In sum, the subsequent section of
the systematic literature review will guide the formation of the research framework for future study.
4. Literature Review
4.1 Relationship Between Top Management Capability (TMC), Relational Capability (RC), Technological
Capability (TC), And Learning Capability (LC)& The Innovation Performance
All types of businesses need effective management (Burgoyne, Hirsh & Williams, 2004). With most SMEs,
though, it is challenging to establish a significant division of labor and specialized networking until a certain
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scale is reached. As a result, management of SMEs has become deeply involved in their work, making it difficult
for them to take advantage of commercial prospects (Arnold & Thuriaux, 1997). In this dynamic economic
environment, companies with managers who have cultivated a proactive, risk-taking approach to engaging in
creative activities will have an advantage over their competitors (Davis et al., 2010). The relationships between
TMC and business firm performance have been the subject of numerous studies. Wang & Dass (2017)
discovered that management innovation leadership has a beneficial impact on business financial performance in
their longitudinal research of 335 US enterprises selected from standard and subpar databases. Hayton (2015)
found that entrepreneurial spirit and top-level management leadership positively correlated with growth,
productivity, and turnover of 2500 English SMEs in the UK. In 2015, Pufal, Zawislak, Reichert, and Alves
conducted a survey of 1331 manufacturing companies in Brazil. The analysis' findings show that professional
firms have a more developed set of managerial skills, which has a major impact on their success compared to
family businesses. According to Shigang and Guozhi's (2016) empirical study on Chinese construction
companies, management capability increases the firm's operating efficiency, which in turn improves financial
performance. Thus, this study postulates that:
H1: There is significant & positive relationship between top management capability and the innovation
performance of China’s high-tech SMEs.
Technological capability (TC) is essential for a company to be able to withstand market volatility and hostility.
Manufacturing companies, on the other hand, should assess their current level of TC and upgrade to a higher
level to improve overall performance and customer satisfaction. Those that have not implemented TC should
think about doing so before an unfavorable event occurs (Ahmad, et al., 2014). Technological capability, then, is
a crucial strategic capability that gives businesses a competitive edge in their respective industries
(Chantanaphant, Nabi & Dornberger, 2013). Numerous research papers have examined the connection between
SMEs enterprises' success and their technological capacity. For instance, Ahmad et al. (2014) argued that
technological capability is a crucial tactic in both the production and operation sectors. According to Reichert
and Zawislak (2014), firms in lower technological intensity industries performed above average despite investing
below average in technological capability. In an Indian study, Batra, Sharma, Dixit, Vohra, and Gupta (2015)
found that technology-driven companies (SMEs) can mitigate industry hostility by using technology as a tactical
tool. Shan and Jolly (2013) studied Chinese businesses and discovered that various technological
capacities—such as those related to production, linkage, and investment—have an impact on business
performance via the mediation of product innovation. Many empirical studies that look at the relationship
between SMEs enterprises' performance and their technology capabilities have found that technological
capability has a big impact on how well a firm performs in terms of innovation. Thus, this study postulates that:
H2: There is significant & positive relationship between the technological capability and the innovation
performance of China’s high-tech SMEs.
Atak (2011) defined learning capability as strategic resource that helps businesses outperform their rivals and
effectively accomplish their goals. Learning improves SMEs' ability to recognize and address new market
difficulties more rapidly and affordably than competitors, as Pucci, Nosi, and Zanni (2017) showed. Maroye et
al., (2017) propounded that a company with great learning capabilities may identify, get, and integrate external
knowledge with ease; it can also enhance its internal capabilities and outperform companies with lower learning
capacities. Mallén, Chiva, Alegre, and Guinot (2015) found that learning capacity amplifies the impact of
altruistic leadership behavior on the success of firms. Kaplan, Ogut, Mehmet, and Asli (2014) found a favorable
correlation between learning and intra-firm information transfer and the financial success of SMEs. Hailekiros
and Renyong (2016) established that learning capacity significantly improves a company's capacity for
technological innovation as well as its overall performance. Ugurlu and Kurt (2016) found a strong positive
correlation between company learning and the performance of Turkish manufacturing SMEs' product innovation.
One of the firm VRIN resources, a firm's learning capability has been identified in the literature described above
as a key factor in developing and maintaining competitiveness. Competitors find it extremely difficult to
strategically develop the same useful resources due to the complicated structure of learning (Farrell, Oczkowski,
& Kharabsheh, 2008). Huang & Wang (2011) concluded that a firm's learning capability helps its intelligence
gather, disseminate, and circulate new knowledge in an efficient manner, enabling it to become a creative and
market-oriented entity. As a result, this study hypothesizes that:
H3: There is significant & positive relationship between learning capability and the innovation performance of
China’s high-tech SMEs.
Bastida, Marimon, & Tanganelli (2017) proposed that SMEs need to build strategies for both vertical and
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horizontal relationships to increase their potential for innovation and performance enhancement. They proposed
that for SMEs to increase performance, they must strategically interact with other partners to gain access to
resources and knowledge. In a study on Chinese manufacturing companies, Yu & Huo (2018) discovered that
relational competence has a substantial impact on the internal, customer, and supplier quality integration of the
company, which significantly and favorably improves performance. Muange & Maru's (2015) concluded that
technological cooperation, production, marketing, and supplier procurement have a major and favorable impact
on a company's performance. Hietajärvi et al. (2017) established that firm's relational capability has the most
influence over the course of the project life cycle. Similarly, the success of an Australian firm's connection
portfolio was positively impacted by relational skill (Luvison & de Man, 2015). In their research on the Thai
partnership project, Rungsithong et al. (2017) found a direct positive correlation between relational capability
and operational performance. Similarly, relational competence has a large and favorable impact on the
performance of third-party logistic providers, as demonstrated by Shou, Shao, and Chen (2017). Thus, this study
postulates that:
H4: There is significant and positive relationship between relational capability and the performance of China’s
high-tech SMEs
4.2 Relationship Between Top Management Capability, Relational Capability, Technological Capability, And
Learning Capability and Innovation Strategy
Coordination of all firm stakeholders' efforts, integration of the operations of all specialized functional units, and
application of knowledge domains are necessary for effective innovation (Bundy, 2002). This crucial role is
entirely dependent on the competence of the upper echelons of management, who oversee developing and
carrying out policies and strategies. Thus, the ability of the company's senior management to use imagination,
innovation, and management skills to establish an organization that fosters and harnesses employee creativity to
achieve its goals is essential (Minh et al., 2017). The ability of top management to recognize and seize
opportunities and make decisions that influence the innovation process and improve a company's success is also
crucial (Lewrick et al., 2011). Numerous studies have looked at the connection between innovative processes
used by SMEs and top management skills. Farrokhian & Soleimani (2015) established that firm's innovation
activities are significantly positively impacted by senior management participation and cooperation abilities.
Minh et al. (2017) discovered that top management competencies have a beneficial impact on subordinate
learning and innovativeness in their research of Vietnamese telecommunications enterprises. Ruizjiménez &
Fuentes-Fuentes (2015) realized senior management competence significantly affects innovation in both
processes and products. These beneficial connections, meanwhile, are only possible when there is a gender
balance within the management group. Ahmed & Mohamed (2017) found that a firm's project success and
efficiency are highly and favorably impacted by management's supportive capacity. As a result, the literature that
is now in publication suggests that top management competence is crucial to a company's innovation efforts.
Thus, this study hypothesizes that:
H5: There is significant and positive association between top management capability and the innovation strategy
of China’s high-tech SMEs.
Innovation is not just about creating new information; it also has a wider context when it comes to research and
development (R&D) and the commercialization of R&D results into valuable products to achieve economic
goals. As a result, it calls for the advancement of technological capabilities (Fang et al., 2016). Therefore, in a
dynamic context, technological aptitude is a vital driver of innovation (Park et al., 2019). The relationship
between a firm's technological capabilities and innovation performance has been the subject of numerous
empirical studies. Alvarez & Iske (2015) found that two significant elements impacting the product innovation of
SMEs in the Netherlands are a firm's technological and marketing skills. In a study on Indian SMEs, Pednekar
(2015) found that high-tech enterprises' value generation is significantly influenced by technology. Shan and
Jolly (2013) discovered that a firm's capacity to innovate its products is significantly enhanced by a variety of
technological innovation capabilities, including teamwork, investment, and manufacturing capabilities. Based on
the extant literature, this study hypothesizes that:
H6: There is significant and positive relationship between technological capability and the innovation strategy of
China’s high-tech SMEs.
The main problems with modern innovation theory are that firms rarely rely solely on their own internal
resources for innovation; instead, they need outside expertise, technical solutions, equipment, and methodologies
(Liao & Wu, 2010). According to Kheng, Mahmood, and Beris (2013), innovations in product, process, and
administration currently are primarily the result of human creativity and the mind working with implicit
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information rather than necessarily coming from R&D labs of businesses. Numerous research has been done to
look at how learning affects a company's innovation efforts. According to Kiziloglu (2015), learning and
innovation activities in businesses have a positive correlation. Similarly, Tohidi et al. (2012) found that learning
capacity has a major and positive impact on the innovation process of Iranian ceramic tile companies. According
to Fang et al. (2011), there is a positive and significant correlation between a firm's innovation and its learning.
Furthermore, learning improves a firm's success in terms of innovation, as found by Karagouni and
Papadopoulos (2007). In a similar vein, Serna et al. (2016) found that learning has a significant role in enhancing
the performance and process of corporate innovation. Additionally, Mahmoud et al. (2016) found that education
had a major influence on Ghana's banking industry's innovation. Learning capability thus becomes a prerequisite
to improving firm's innovativeness and sustainable competitive advantage, as it is a culture carried out by
learning business enterprises with the goal of fashioning and promoting a valued outcome by increasing
employee's competence (Verma et al., 2014). Therefore, this study hypothesizes that:
H7: There is significant and positive association between learning capability and the innovation strategy of
China’s high-tech SMEs.
For the innovation process to be successful, it usually needs technological cooperation from a variety of
subsystems, suppliers, and users who can offer complementary resources, technologies, and information. All
forms of innovation require collaboration to be successful (Makhdoom et al., 2019, Park et al., 2019). Building
relationships with outside organizations is a crucial skill that helps innovation projects be completed successfully
(Schilling & Phelps, 2007). By actively interacting with other organizations and hiring experts, successful SMEs
can open the commercialization of their innovation process, which helps them overcome their weaknesses and
carry out competitive innovation activities (Henttonen & Lehtimäki, 2017). Research has shown that while
relationships with clients help to successfully offer incremental innovation, relationships with research
institutions significantly lead to radical innovation (Caner & Tyler, 2013; Liyanage, 1995; Nieto & Santamaría,
2007). In the Italian economy, it was discovered that a firm's innovation performance and its technology strategy
are mediated by its relationships with external partners (Aloini et al., 2015). Customer relational competence,
according to Anning-Dorson et al. (2018), enables businesses to build significant customer participation. As a
result, the businesses made use of the skills of their clients to increase the output of their innovation process,
greatly improving their performance. Furthermore, the study conducted by Cheng, Chen, & Huang (2014) on
Taiwanese enterprises showed that relational capacity improves the relational value base and innovation
performance of manufacturing firms. Therefore, this study hypothesis that:
H8: There is significant and positive relationship between relational capability and the innovation strategy of
China’s high-tech SMEs.
Leal-Rodríguez et al. (2015) propounded that innovation strategy helps businesses achieve a sustained
competitive advantage and cope with a changing and chaotic environment. Innovation approach greatly and
favorably improves the performance of Malaysian telecommunications companies (Taghizadeh et al., 2016).
Taiwanese firms' performance is positively impacted by their innovation approach (Tsai et al., 2008). Turulja and
Bajgoric (2019) have confirmed that improving a Bosnian firm's performance requires innovation in both
processes and products. In France, innovation strategy significantly improves a company's operational
performance and the integration of its suppliers (Duhaylongsod & De Giovanni, 2019). Therefore, to improve
performance, SMEs must proactively take innovative risks. Therefore, this study hypothesizes that:
H9: There is significant and positive relationship between innovation strategy and the innovation performance of
China’s high-tech SMEs
4.3 The Mediating Role of Innovation Strategy
Al-janabi (2016) concluded that small and medium-sized enterprises (SMEs) need to have an effective
innovation strategy to survive in this competitive climate and quickly adapt to changes in market demand. The
mediating function of innovation strategy has been validated by several research (Segarraciprés & Bou-llusar,
2018). Hemmati and Hosseini (2016), a company's innovation acts as a mediator in the relationship between
knowledge management and performance. In addition, Obeidat's (2016) analysis confirmed that innovation
mediates the relationship between a firm's performance and its strategic orientation to some extent. However,
Arias Perez et al. (2015) discovered that product innovation played a partially mediating effect in the association
between process innovation and firm performance. According to Leal-Rodríguez et al. (2015), innovation acts as
a mediator between unlearning and the performance of all business types. Yusr (2016) has shown that innovation
strategy is crucial for small and medium-sized enterprises (SMEs) functioning in this dynamic environment,
where consumer needs and preferences change quickly, delivery times are short, technologies are changing
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quickly, and product life cycles are shorter. Thus, SMEs need to create creative survival strategies to stay
competitive in this harsh climate (Abdul Hamid & Tasmin, 2013, Ozkaya, 2011). Based on the above narration,
this study hypothesized that:
H9: Innovation strategy mediates the relationships between top management capability, relational capability,
technological capability, and learning capability and the innovation performance of high-tech SMEs in China.
4.4 Underpinning Theories
The purpose of this study is to verify if the variables under investigation may enhance the performance of
China's high-tech SMEs in the context of innovation performance. Due to their leading transitory nature in
achieving a competitive firm's performance in a changing market environment, Resource-based view (RBV) and
Dynamic Capability Theory (DCT) are deemed appropriate. This is in addition to the dynamic nature of today's
operating business environment, where skills, capabilities, knowledge, and techniques frequently become
obsolete (Barney, 1991; Teece et al., 1997). Because both theories emphasize the significance of a firm's
capabilities in achieving and maintaining superior performance, this study uses the RBV and DCT to explain the
relationship between China's high-tech SMEs' innovation strategy and innovation performance and the strategic
capabilities of top management, relational, technological, and learning capabilities.
Foremost, Resource-Based View (RBV) is a theoretical framework that focuses on the internal resources and
capabilities of firms as sources of competitive advantage and superior performance. It suggests that for a firm to
achieve and sustain a competitive advantage, it must possess resources that are valuable, rare, inimitable, and
non-substitutable (VRIN) (Barney, 1991). This perspective is particularly relevant in the context of high-tech
SMEs (Small and Medium Enterprises) in China due to several reasons. Firstly, high-tech industries operate in
dynamic environments characterized by rapid technological advancements, changing market demands, and
intense competition. In such environments, the traditional factors of production (land, labor, and capital) may not
be sufficient to sustain a competitive advantage. Instead, firms need to continuously innovate and develop new
capabilities to adapt to changing circumstances. The RBV provides a framework for understanding how firms
can leverage their internal resources and capabilities to navigate these challenges effectively. Secondly,
entrepreneurial core capability refers to the firm's ability to identify and exploit entrepreneurial opportunities. In
the context of high-tech SMEs in China, where innovation and entrepreneurship are highly encouraged and
supported by government policies, it is essential to understand how firms can develop and leverage their
entrepreneurial core capabilities to gain a competitive edge. The RBV emphasizes the importance of unique,
valuable resources and capabilities that enable firms to seize entrepreneurial opportunities and create value
(Wernerfelt, 1995). Thirdly, dynamic managerial capability refers to the firm's ability to continuously adapt and
renew its resource base in response to changing market conditions and competitive pressures. In the fast-paced
and rapidly evolving high-tech industry in China, firms need to develop dynamic managerial capabilities to
effectively manage their resources and respond to emerging opportunities and threats. The RBV provides
insights into how firms can build and cultivate such capabilities by leveraging their existing resources and
competencies while also developing new ones over time. Fourthly, innovation is a critical driver of competitive
advantage and performance, especially in high-tech industries where technology and product innovation are key
sources of differentiation (Barney, 1991). Understanding how firms can develop effective innovation strategies
and enhance their innovation performance is essential for success in this context. The RBV offers a lens through
which to examine how firms can leverage their unique resources and capabilities to drive innovation and achieve
superior performance outcomes (Wernerfelt, 1984). Finally, China's high-tech SMEs operate in a unique
institutional and market context characterized by rapid economic growth, government support for innovation and
entrepreneurship, and increasing global integration. In this context, the RBV provides a valuable framework for
understanding how firms can leverage their internal resources and capabilities to compete effectively in domestic
and international markets while also navigating the unique challenges and opportunities present in the Chinese
business environment (Halawi et al., 2005). In summary, the Resource-Based View offers a valuable theoretical
foundation for studying entrepreneurial core capability, dynamic managerial capability, innovation strategy, and
innovation performance in the context of China's high-tech SMEs. By focusing on the internal resources and
capabilities of firms, the RBV provides insights into how firms can develop and leverage their unique strengths
to achieve and sustain a competitive advantage in dynamic and highly competitive markets (Barney, 1991).
In addition, Dynamic Capability Theory (DCT) is a theoretical framework that focuses on a firm's ability to
integrate, build, and reconfigure internal and external competencies to address rapidly changing environments
(Eisenhardt & Martin, 2000; Teece, et al., 1997). It emphasizes the importance of organizational learning,
flexibility, and adaptability in achieving and sustaining competitive advantage. In the context of China's
high-tech SMEs, DCT offers several insights into the study of entrepreneurial core capability, dynamic
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managerial capability, innovation strategy, and innovation performance. DCT suggests that entrepreneurial core
capability is not static but rather a dynamic process of sensing and seizing opportunities, and then reconfiguring
resources to exploit these opportunities. In the context of China's high-tech SMEs, which operate in a rapidly
evolving market environment with abundant opportunities for innovation and growth, understanding how firms
develop and leverage their entrepreneurial core capabilities is crucial (Eisenhardt & Martin, 2000). DCT helps to
analyze how firms continuously scan their environment for opportunities, make strategic decisions to pursue
promising avenues, and adapt their resources and capabilities to capitalize on these opportunities effectively.
Dynamic managerial capability refers to a firm's ability to adapt its managerial processes and practices in
response to changing market conditions and competitive pressures. In China's high-tech sector, where
technological advancements and market dynamics evolve rapidly, firms need to constantly adjust their
management practices to remain competitive. DCT provides insights into how firms can develop processes for
knowledge creation, sharing, and integration, as well as mechanisms for decision-making and resource allocation
that enable them to respond effectively to changing circumstances. Innovation is a key driver of competitive
advantage and performance for high-tech SMEs in China. DCT emphasizes the importance of dynamic
capabilities in fostering innovation by enabling firms to recognize emerging opportunities, mobilize resources,
and reconfigure organizational processes to support innovation initiatives (Eisenhardt & Martin, 2000). In the
context of China's high-tech SMEs, where innovation is increasingly seen as a strategic priority, DCT helps to
understand how firms can develop innovation strategies that leverage their existing capabilities while also
building new ones to stay ahead of the competition. China's high-tech SMEs operate in a unique context
characterized by rapid technological change, intense competition, and government support for innovation and
entrepreneurship. DCT provides a valuable lens through which to understand how firms in this context develop
and leverage dynamic capabilities to navigate these challenges effectively. By focusing on the processes of
sensing, seizing, and reconfiguring resources, DCT helps to explain how firms in China's high-tech sector adapt
to changing market conditions, exploit emerging opportunities, and achieve superior innovation performance. In
summary, Dynamic Capability Theory offers a valuable theoretical foundation for studying entrepreneurial core
capability, dynamic managerial capability, innovation strategy, and innovation performance in the context of
China's high-tech SMEs. By emphasizing the importance of organizational learning, flexibility, and adaptability,
DCT provides insights into how firms develop and leverage dynamic capabilities to achieve and sustain
competitive advantage in rapidly evolving markets (Eisenhardt & Martin, 2000).
4.5 Conclusion
This study has examined the multifaceted relationship between top management capability, relational capability,
technological capability, learning capability, innovation strategy, and innovation performance among
high-technology Small and Medium Enterprises (SMEs) in China. By integrating insights from the
Resource-Based View (RBV) and Dynamic Capability Theory (DCT), we have gained a deeper understanding of
how these capabilities interact to shape innovation outcomes in the dynamic landscape of China's high-tech
sector. This study findings underscore the critical role of top management capability in setting strategic direction
and fostering a culture of innovation within SMEs. Effective leadership is essential for aligning organizational
goals with innovation strategies and driving implementation efforts. Furthermore, relational capability emerges
as a key determinant of innovation success, highlighting the importance of building and nurturing collaborative
relationships with stakeholders to access external knowledge, resources, and market opportunities. Moreover,
technological capability plays a pivotal role in leveraging advanced technologies and expertise to drive
innovation, while learning capability enables firms to continuously adapt and evolve in response to changing
market dynamics and technological advancements. The alignment between innovation strategy and dynamic
capabilities is crucial for achieving innovation performance. Firms that effectively leverage their internal
resources and capabilities to formulate and execute innovation strategies are better positioned to achieve
sustainable competitive advantage and superior performance in the high-tech sector. Overall, this study
underscores the significance of a holistic approach to managing dynamic capabilities and innovation strategy in
high-tech SMEs in China, providing valuable insights for both theoretical advancement and practical
implications for firms seeking to enhance their innovation performance and competitiveness in today's dynamic
business environment.
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