The role of global dynamic managerial capabilities in international performance of emerging economy SMES: A moderated - mediation mechanism of entrpreneurial and digital orientations

Small and medium-sized enterprises (SMEs) are vital contributors to the economic and social development of emerging economies, accounting for 35-50% of gross domestic product (GDP) and more than 50% of employment. They play a critical role in fostering innovation, creating employment opportunities, and alleviating poverty. In Pakistan, SMEs comprise 90% of the country's total business entities and contribute 40% to the national GDP. However, these enterprises face significant challenges in achieving competitive international performance due to an underdeveloped workforce, inadequate technological infrastructure, and limited access to information and global markets.

Existing literature on SMEs' internationalization predominantly focuses on resource-based and institutional perspectives, often overlooking the role of dynamic managerial capabilities in navigating global market complexities. While some studies have highlighted dynamic capabilities as essential for competitive advantage, there remains a significant gap in understanding how global dynamic managerial capabilities (GDMCs)-the capacity of managers to adapt, integrate, and reconfigure organizational resources in response to dynamic international markets-facilitates, the international performance of SMEs in emerging economies. Furthermore, prior research has largely neglected the interplay of digital orientation (DO) and entrepreneurial orientation (EO) within this framework, despite their growing importance in contemporary business environments. This study addresses these gaps by investigating the direct influence of GDMCs on international performance. International performance, in this context, refers to a firm's ability to achieve sustainable success in foreign markets, assessed through indicators such as export growth, market expansion, and profitability. This study also examines the mediating role of digital orientation (DO), which refers to the strategic emphasis on leveraging digital technologies to improve competitiveness and operational efficiency. Additionally, the study explores the moderating role of entrepreneurial orientation (EO), defined as a firm's strategic posture towards innovation, proactiveness, and risk-taking, in shaping the relationship between global dynamic managerial capabilities and international performance.

By employing a moderated mediation framework, this research empirically tests the hypothesized relationships by collecting data from a sample of 800 Pakistani SMEs over two waves and 380 completed and useable responses were received. Hypotheses were tested using Partial Least Squares Structural Equation Modeling (PLS-SEM) and regression techniques (Heyes Process Macro 4 & 14). The findings demonstrate that dynamic managerial capabilities exert a positive and significant effect on international performance, with digital orientation serving as a crucial mediating variable. However, entrepreneurial orientation did not significantly moderate the mediated relationship between dynamic managerial capabilities and international performance in the context of Pakistani SMEs.

This research makes a unique contribution by integrating GDMCs, digital orientation, and entrepreneurial orientation into a single conceptual framework, providing a nuanced understanding of how managerial adaptability and digital transformation drive SMEs internationalization in emerging economies. The study offers critical insights for managers, policymakers, and scholars, underscoring the necessity for SMEs in emerging economies like Pakistan, to develop strong managerial capabilities and embrace digital transformation to compete effectively in increasingly digitalized and uncertain international markets.