Institutions, dynamic capabilities and firm performance: an analysis of corporate entrepreneurship in Colombia

Purpose This paper aims to investigate the direct and indirect effects of institutions on the relationship between corporate entrepreneurship (CE) and firm performance in the context of Colombia. Grounded in institutional theory and the dynamic capabilities view, the authors develop a conceptual model to examine: the CE–firm performance relationship, the moderating role of formal and informal institutions and the mediating effect of dynamic capabilities in this association. Design/methodology/approach This study uses a correlational research design to investigate the relationships between CE, institutions and dynamic capabilities and their potential impact on firm performance. Data was collected through a survey of 326 managers from Colombian firms with more than 20 employees. Findings The authors find that institutions have a causal influence on firm performance. CE actions are linked to firm performance, but they are substantially affected by the institutional context. This study provides information about the capabilities that firms need to develop to navigate institutional environments and design, deploy and evaluate appropriate CE strategies. Research limitations/implications This paper has limitations that suggest future research opportunities. First, single-respondent data may introduce bias; future studies should gather data from multiple sources within firms. Second, cross-sectional data limit causal claims, warranting longitudinal studies. Third, Colombia-focused findings need validation across other emerging economies. Fourth, research should examine individual-level factors influencing entrepreneurship. Fifth, additional mediators/moderators should be explored. Finally, post-pandemic replication could address data collection constraints. Practical implications This paper indicates that the association between CE and institutional contexts significantly enhances firm performance in emerging economies. The results demonstrate that managers should: cultivate adaptive dynamic capabilities, strengthen organizational learning mechanisms and foster collaborations to develop sustainable competitive advantages. While firms typically rely on formal institutions, Colombia’s pro-innovation legislation should prioritize corporate-startup collaboration to drive innovation and institutional adaptation. Policymakers must expand CE-focused initiatives, particularly external corporate venturing, which enhances capabilities, resources and competitiveness. Originality/value This study offers a new theoretical perspective built on institutional theory and the dynamic capabilities’ view to enhance the understanding of relationships between CE and firm performance; the effects of (formal and informal) institutions on the CE–firm performance relationship; and the mediating role of dynamic capabilities in the association between institutions and the CE–firm performance relationship. This study provides a novel analysis of the effect of the institutional context in the configuration, development and deployment of new routines and capabilities that enhance firm performance.