Synergistic impact of entrepreneurial orientation and knowledge creation on dynamic capabilities: Catalyzing firm performance

Background Companies must reengineer resources and capabilities to achieve superior performance. Entrepreneurially driven businesses thrive by innovating, adapting, and influencing the market, enabling them to create new resources and strategic capabilities. The dynamic nature of today’s competitive landscape demands meticulous organization, synergy, and deployment of resources and capabilities. Fostering entrepreneurial orientation is critical, as it directs strategic actions to optimize resource use and capability development. Objective This research explores the interplay between entrepreneurial orientation and knowledge creation in enhancing dynamic capabilities to achieve superior performance. Methods A study of 396 SMEs in Bali, Indonesia, collected data from 168 valid responses via an online questionnaire. Structural equation modeling using Warp-PLS 7.0. Results Revealed significant effects of entrepreneurial orientation on dynamic capabilities and firm performance. Knowledge creation also positively influenced these factors. Moreover, dynamic capability mediated the relationships between entrepreneurial orientation, knowledge creation, and firm performance. Dynamic capabilities, defined as consistent reconfiguration of resources and competencies, are pivotal for performance enhancement. Entrepreneurial orientation and knowledge creation are essential in amplifying these capabilities. Conclusions This research enriches the literature on knowledge creation and dynamic capabilities, offering strategic insights for practitioners to effectively leverage these elements for superior performance and sustainable competitive advantage.