Human capabilities and firm performance in women-owned micro and small-medium enterprises: The mediating role of substantive and dynamic capabilities

Dynamic capabilities are widely recognized as a catalyst for firm performance yet there is a dearth of research on how dynamic capabilities work with human and substantive capabilities to contribute to firm performance particularly in women-owned micro and small firms. This study investigates the influence of human capabilities on firm performance, mediated by both substantive and dynamic capabilities. Drawing on Zahra et al., (2006) conceptual model of substantive and dynamic capabilities, we test the relationship between human capabilities of women business owners and substantive and dynamic capabilities as they act on firm performance. We find that human capabilities directly and indirectly influence firm financial performance, mediated by substantive and dynamic capabilities. Substantive capabilities do not directly influence firm performance but have a role indirectly through dynamic capabilities. The results illuminate the interplay between capabilities as key drivers of financial performance and contribute novel insights into human and substantive and dynamic capabilities for policymakers when developing policy to support micro and small firm performance.