From Vulnerability to Resilience: Dynamic Capabilities as a Moderating Mechanism Under Environmental Turbulence in Developing Economies

ABSTRACT SMEs in developing economies operate under persistently volatile environments where economic instability, regulatory uncertainte and technological disruptions threaten their survival. Here, sustainability shifts from long‐term environmental or socioeconomic performance to strategic resilience. In this study, we investigate how dynamic capabilities condition the effect of business environmental forces on SME sustainability in Nigeria. Grounded in contingency and dynamic capability theory, this study adopts a quantitative, cross‐sectional survey design using data from 285 Nigerian SMEs. It examines the direct effects of economic, legal and technological environmental forces, as well as the moderating roles of sensing and seizing, and learning and reconfiguration capabilities, on SME strategic resilience using PLS‐SEM. The results show that economic, legal and technological turbulence significantly affect SME strategic resilience, with legal turbulence emerging as the strongest constraint. Findings further reveal that dynamic capabilities–sensing and seizing, learning and reconfiguration–significantly moderate the effect of environmental turbulence on SME strategic resilience and strengthen SME capacity in absorbing shocks, reconfiguring resources and sustaining operations under disruptions. This study contributes by reframing SME sustainability as strategic resilience amid environmental turbulence, differentiating external pressures into economic, legal and technological dimensions, and showing how dynamic capability bundles condition SME strategic resilience in a highly volatile developing‐economy context. This study offers insights relevant to other emerging economies characterised by institutional instability, policy unpredictability and uneven technological development. It also broadens understanding of contingency and dynamic capability theory in developing economies and positions dynamic capabilities as vital for resilience‐building, not just competitive advantage.