Strategic agility, marketing agility, and market-driving capability: a dynamic capability perspective on SME performance in emerging markets

Purpose This study examines the relationship between strategic agility, marketing agility and market-driving capability in enhancing small and medium enterprise (SME) performance in emerging markets. Given the high market volatility and resource constraints in these economies, this study also explores the moderating role of environmental dynamism in shaping these relationships. While strategic agility is widely recognized as a critical capability, its interaction with marketing agility and market-driving capability remains underexplored in the SME context. This study aims to bridge this research gap by integrating these capabilities under the dynamic capability view (DCV) framework to provide a comprehensive understanding of their impact on firm performance. Design/methodology/approach This study adopts a quantitative approach using partial least squares structural equation modeling to analyze data collected from 220 SME owners and managers in East Java, Indonesia. The study uses validated measurement scales for strategic agility, marketing agility, market-driving capability, business performance and environmental dynamism. Data were obtained through structured surveys, and bootstrapping was applied to test direct, mediating and moderating effects. Findings The results confirm that strategic agility significantly enhances SME performance, both directly and through market-driving capability as a mediating factor. However, marketing agility does not significantly impact performance, suggesting that reactive market adjustments alone may not drive firm success. Environmental dynamism positively moderates the effect of strategic agility on firm performance but weakens the influence of market-driving capability, indicating that highly volatile environments limit firms’ ability to shape market trends. These findings emphasize the need for SMEs to balance adaptive and proactive strategies, reinforcing the importance of integrating strategic agility with long-term market-shaping approaches. Originality/value This study advances the DCV by demonstrating how strategic agility, marketing agility and market-driving capability interact to drive SME performance in emerging markets. Unlike previous studies that examine these capabilities separately, this study integrates them within a comprehensive framework, highlighting their interdependencies. Furthermore, the findings provide novel insights into the contingent role of environmental dynamism, emphasizing its dual impact on firm adaptability and market-shaping efforts. By focusing on SMEs in emerging markets, this study contributes to theoretical and practical discussions on competitive agility, offering implications for entrepreneurs, policymakers and researchers in global emerging economies.