Dynamic Capabilities and Firm Growth: A Framework-Based Systematic Literature Review

Objective A main feature of today's business environment is the constant change and turbulence in the environmental factors in the business ecosystem, putting the survival and growth of firms at risk. Dynamic capabilities refer to the ability of businesses to adapt to market changes, developments in technologies, and changes in other factors in the ecosystem that impact the firm’s performance over time. These capabilities enable businesses to identify opportunities and threats, learn, innovate, and transform themselves to adapt to the environment, and expand their activity and operations, or firm growth, in organic or non-organic ways. However, the varied definitions and taxonomies of the concept of dynamic capabilities in the literature have resulted in confusion among academics and practitioners. Therefore, the main goal of this study is to identify the antecedents, processes, hierarchy of dynamic capabilities, and the outcomes of their deployment with an emphasis on firm growth, and to provide a conceptual model of this framework. Methodology A qualitative research methodology was conducted based on the steps of the framework-based systematic literature review approach. The model used included six steps, and 14 questions related to the steps were introduced, and they were practically implemented in the form of the research questions of this study. Web of Science and Scopus databases were examined to retrieve the articles for the period of 1997 to 2023, with a focus on the dynamic capabilities perspective, to identify the antecedents, processes, and outcomes of the deployment of dynamic capabilities in business firms. A total of 90 articles were chosen for qualitative analysis. Findings Analysis of the research findings and coding using the qualitative content analysis method led to the identification of 1,011 primary codes, which were categorized into 44 sub-categories and 10 main categories. According to the framework used in the systematic literature review, i.e., APO, the main categories were classified into the antecedents, processes, and outcomes of the deployment of dynamic capabilities. Conclusion The literature analysis identified two categories of internal antecedents—at the individual and organizational levels—as well as environmental antecedents, which include key factors in the business ecosystem that influence the firm. The organization’s capabilities portfolio comprises operational capabilities at the foundational level, followed by three tiers of dynamic capabilities that constitute the micro-foundations, or underlying mechanisms, of the dynamic capabilities framework. At the lowest level of the dynamic capabilities hierarchy are the first-order dynamic capabilities, such as strategic decision-making, new product development, and research and development. The second-order dynamic capabilities include organizational learning, absorptive capacity, and knowledge management processes. At the highest level are the sensing, seizing, and transforming/reconfiguring capabilities. In addition, the internal and external outcomes of deploying the dynamic capabilities, including survival, superior performance of the firm, competitive advantage, and firm growth, were identified.