From organizational agility to brand equity: Customer-perceived dynamic capabilities and service innovation

Type of the article: Research ArticleAbstractOrganizational agility and service innovation have become critical strategies for strengthening customer-based brand equity in highly competitive hospitality markets. However, how customers perceive firms’ dynamic capabilities and how such perceptions translate into brand-related outcomes remains insufficiently understood. Drawing on perception-based extensions of dynamic capabilities theory, this study examines the direct and indirect effects of customer-perceived dynamic capabilities on customer-based brand equity, with customer-perceived service innovation as a mediating mechanism, in the Indonesian hotel industry. Data were collected from 340 customers who stayed at three- to five-star hotels in Indonesia between June and August 2024 using a structured questionnaire. Two-stage Structural Equation Modelling (SEM) approach was employed to test the proposed relationships. The results indicate that customer-perceived dynamic capabilities have a significant positive effect on customer-based brand equity (β = 0.389, p < 0.001) and on customer-perceived service innovation (β = 0.768, p < 0.001). Customer-perceived service innovation positively influences customer-based brand equity (β = 0.309, p < 0.001) and partially mediates the relationship between dynamic capabilities and brand equity. Existing brand strength positively moderates the relationship between customer-perceived dynamic capabilities and perceived service innovation (β = 0.109, p < 0.001), while no moderating effect is observed between service innovation and brand equity. The model explains 77.78% of the variance in customer-based brand equity and 68.10% of the variance in customer-perceived service innovation. These findings demonstrate that dynamic capabilities contribute to brand equity not only through innovation outcomes but also as customer-recognized signals of organizational adaptability in service-intensive contexts.AcknowledgmentThe authors declare that there is no conflict of interest. The study received no external funding. All authors contributed equally to the conceptualization, analysis, and writing of this paper.