1. Introduction
Competitive advantage is crucial for every company, especially in this era where competition is very fierce and the environmental conditions are changing unanticipatedly. A firm’s competitive advantage is obtained by relying on distinctive and unique resource empowerment which cannot be imitated by competitors and is useful to respond to dynamic environmental changes (Barney, 1991). Many researchers have reviewed a firm’s competitive advantage based on a resource-based view which defines dynamic capabilities as a source and tool in achieving competitive advantage (Teece et al., 1997; Eisenhardt & Martin, 2000; Helfat & Martin, 2015). There are a few perspectives on how a firm’s competitive advantage generates from empowering its dynamic capabilities. One of which is highlevel innovation capacity of dynamic capabilities as the basis for competitive advantage (Teece et al., 1997) and another is resource configuration as a source of competitive advantage (Eisenhardt & Martin, 2000).
In the highly competitive and dynamic environment of the business sector, both established companies and new business ventures are treated the same. An empirical study showed that responsiveness to the change in the environment has a positive impact on the competitiveness of a company (Nguyen & Khoa, 2020). New business ventures have weaknesses compared to established companies in terms of the availability and access to resources as well as legitimacy in the competitive market. To build profitable market positions, new ventures have to address multiple challenges on several fronts. Most ventures, however, have limited knowledge bases and the reach (scope) of their external connections is limited (Larraneta et al., 2012). New business ventures can encounter this dynamic competition through capability empowerment to configure and integrate resources with pioneer or stabilizing strategy. Both stabilizing and pioneering strategies to resource integration positively influence new ventures’ competitive advantage under the condition of low environmental dynamism and either high/ low environmental largesse. (Cai et al., 2016).
Several previous empirical studies have been conducted to examine the relationship between dynamic capabilities and competitive advantage which showed that dynamic capabilities positively influenced both competitive advantage and service capabilities. Service capabilities and competitive advantage were positively related to organizational performance. (Kuo et al., 2017; Chukwuemeka & Onuoha, 2018) but it is still not sufficient to see the direct relationship between dynamic capabilities and competitive advantage. The majority of the researchers argued that dynamic capabilities do not have a direct influence on competitive advantage. Mostly, they tested the relationship with a mediating variable such as ambidexterity organizations (Jurksien & Pundziene, 2015); the moderation of dynamic environments (Schilke, 2014; Li & Liu, 2014).
Previous empirical studies have found a significant positive relationship between dynamic capabilities and competitive advantage in established companies. However, it is unclear if these correlations hold for new business ventures. Our research fills this gap by investigating whether the competitive advantage of a new business venture can be obtained from dynamic capabilities empowerment and the effect of mediating entrepreneurial creativity and/ or ambidextrous innovation on the relationship between dynamic capabilities and competitive advantage.
Our paper was adapted from a previous empirical model of the relationship between dynamic capabilities and competitive advantage. The model was modified to determine the mediation of entrepreneurial creativity and/ or ambidextrous innovation in the relationship between dynamic capabilities and the competitive advantage of a new business venture. We contribute new findings regarding the effect of dynamic capabilities empowerment on new business venture‘s competitive advantage by mediating entrepreneurial creativity and ambidextrous innovation.
2. Literature Review
2.1. Dynamic Capabilities and Competitive Advantage
Empowerment of a firm’s dynamic capabilities is important to generate a competitive advantage and to maintain the survival of the company. Previous empirical studies showed that dynamic capabilities had a significant effect on competitive advantage (Chukwuemeka & Onuoha, 2018; Kuo et al., 2017). Companies that succeed in building a competitive advantage from dynamic capabilities have independent competence and resource management that generate unique values (Sirmon et al., 2007). Other studies also established the existence of a significant impact of a firm’s dynamic capabilities on the level of a firm’s competitiveness (Ali et al., 2020) and dynamic capabilities and innovation capability are important to changing the competition game (Vu, 2020). To achieve competitive advantage from dynamic capabilities empowerment, both established companies and new business ventures face intense competition and rapid environmental changes. A study on new business ventures shows that both stabilizing and pioneering approaches to creating new capabilities in managing environmental changes and resource integration positively influence new ventures’ competitive advantage. The stabilization approach is more appropriate to be applied in an environment that is less competitive and less dynamic. On the contrary, a pioneering approach is best to be used in a very tight and dynamic competition. (Cai et al., 2016). Empowering dynamic capabilities in responding to environmental changes, will enable new business ventures to have a competitive advantage. Therefore, we propose the hypothesis :
H1: Dynamic capabilities are positively associated with a competitive advantage.
2.2. Dynamic Capabilities and Entrepreneurial Creativity
Based on the perspective of an “ability”, dynamic capabilities are attached to the capacity of the managers or human resources. Teece and Leih (2016) emphasized that the dynamic capabilities of a company contain the manager’s entrepreneurial elements that enable the company to produce creativity. This entrepreneurial aspect brings original creativity and a new venture for the company (Kleinbaum & Stuart, 2014; Teece & Leih, 2016). Some scholars hold that dynamic capability is one of the keys to achieving competitive advantage and consequently, performance in strategic management. It was found that dynamic capabilities, creativity, and innovation competencies do significantly, positively, affect performance, while entrepreneurial orientation is a moderator. The empirical study showed that dynamic capabilities had a significant impact on a firm’s creativity (Ferreira et al., 2017). The relationship between dynamic capabilities and entrepreneurial creativity still requires further empirical examination. Therefore, we propose the hypothesis :
H2: Dynamic capabilities are positively associated with entrepreneurial creativity.
2.3. Dynamic Capabilities and Ambidextrous Innovation
Empowering a firm’s dynamic capabilities is intended and beneficial to maintain the firm’s survival. Dynamic capabilities and competitive advantage are likely to be essential to the survival of firms in markets characterized to be innovative and in rapid technology change. It is argued that local firms ought to stimulate their dynamic capabilities to successfully compete in markets (Aguirre, 2011). Dynamic capabilities are no longer limited to ordinary organizational capabilities (Teece et al., 1997; Eisenhard & Martin, 2000) but also to those that make breakthroughs in the form of innovation (O'Reilly & Tushman, 2011). Companies that can produce a breakthrough balance of exploitative innovation and explorative innovation which is known as ambidextrous innovation will have a competitive advantage. Balancing explorative and exploitative innovation ambidextrously has been conceived as having positive performance effects (Chang & Hughes, 2012). The study of the relationship between dynamic capabilities and ambidextrous innovation is still rare and previous empirical research showed that dynamic capabilities had a significant effect on innovation capability (Ferreira et al., 2017). The relationship between dynamic capabilities and ambidextrous innovation still requires further examination. Therefore we propose the hypothesis :
H3: Dynamic capabilities are positively associated with ambidextrous innovation,
2.4. Entrepreneurial Creativity and Competitive Advantage
The efforts to create original creativity that contains a new venture which is known as entrepreneurial creativity are beneficial in maintaining a firm’s survival. Furthermore, companies with a creative culture have a more competitive advantage than competitors that do not have a creativity culture (Woodman et al., 1993). The study of the relationship between entrepreneurial creativity and competitive advantage is still rare. Madzar and Ines (2019) investigated the creativity management of several companies and their impact on a firm’s competitiveness and revealed that organizations implementing the creativity management system have a higher level of profit per employee, as well as a higher level of their profitability. There is a statistically significant difference in achieving the competitive advantage of those companies that use the organizational creativity management system and those which do not. Research results suggest that successful creativity management positively influences the company’s competitive advantage. Other empirical studies showed that entrepreneurial creativity had a positive and significant effect on the competitive advantage of established companies (Kathiravan et al., 2019). New business ventures generate original creative ideas and significant new ventures as a response to intense competition and company survival. The more original creative ideas and a new venture, the greater the competitive advantage belongs to new business ventures. Therefore we propose the hypothesis :
H4: Entrepreneurial creativity is positively associated with a competitive advantage.
2.5. Entrepreneurial Creativity and Ambidextrous Innovation
Regarding the relationship between creativity and innovation, some researchers agreed that creativity is used to enhance innovation (Subramaniam & Youndt, 2005; Lestari et al., 2020). Entrepreneurial creativity facilitates communication and increases innovation (Gumusluoglu & Ilsev, 2009), and the results of entrepreneurial creativity can increase innovation (Somech & Zahavy, 2013). Meanwhile, entrepreneurial creativity is significant in generating innovation in an established company (Heunk, 1998) and entrepreneurial creativity has a significant effect on radical innovation in new companies (Baron & Tang, 2011). Other empirical studies showed that entrepreneurial creativity had a significant effect on process innovation and product innovation in established companies (Ahlin et al., 2013). It is also believed that entrepreneurial creativity has a significant effect on the innovation of medium- and smallscale companies (Noor et al., 2018). New business ventures face intense competition and dynamic environment changes and to maintain the company’s sustainability in addition to producing incremental innovation, it must produce radical innovation. This balance between incremental and radical innovation is known as ambidextrous innovation. The more original creative ideas and a new venture, the stronger the ambidextrous innovation. Therefore, we propose the hypothesis :
H5: Entrepreneurial creativity is a positive association with ambidextrous innovation.
2.6. Ambidextrous Innovation and Competitive Advantage
Innovative companies have a more flexible character and greater capacity to adapt to the changes than non-innovative companies (Bibi et al., 2020). Furthermore, Chang and Hughes (2012) stated that companies that can produce exploitative and explorative innovation will have a competitive advantage. Empirical studies showed that innovation had a significant effect on competitive advantage in established manufacturing companies (Chatzoglou & Dimitrous, 2018). Other empirical studies showed that explorative and exploitative service innovation to customers had a significant effect on competitive advantage in established companies (Liu & Huang, 2018). New business ventures and established companies both need a balance between exploitative innovation and explorative innovation which is known as ambidextrous innovation to gain a competitive advantage. Ambidextrous innovation would increase a firm’s competitive advantage. Therefore we propose the hypothesis :
H6: Ambidextrous innovation is positively associated with a competitive advantage.
2.7. Entrepreneurial Creativity and Ambidextrous Innovation Mediation
Peteraf et al. (2013) mentioned that the concept of dynamic capabilities is to explain why some companies are successful in maintaining their competitive advantage. A firm’s competitive advantage is obtained through dynamic capabilities empowerment (Teece et al., 1997). Studies suggested that the relationship between dynamic capabilities and competitive advantage may be jointly affected by organizational and environmental factors. (Fainshmidt et al., 2018). Dynamic capabilities of the firm reveal the capacity of the organization to successfully implement actions that will lead to sustainable competitive advantage. That is the use of creative and innovative ideas to handle any changes in the business environment. The majority of the researchers argued that dynamic capabilities do not have a direct influence on competitive advantage. Most researchers examined the relationship between dynamic capabilities and competitive advantage with a mediating variable such as ambidexterity organizations (Jurksien & Pundziene, 2015; Schilke, 2014; Li & Liu, 2014). The other mediation variable such as entrepreneurial creativity and ambidextrous innovation in mediating dynamic capabilities on competitive advantage is known as strategic action or strategic change (Helfat & Martin, 2015). Entrepreneurial creativity and ambidextrous innovation will increase the influence of dynamic capabilities on competitive advantage. Therefore we propose the hypothesis :
H7a: Entrepreneurial creativity positively mediates the relationship between dynamic capabilities and competitive advantage
H7b: Ambidextrous innovation positively mediates the relationship between dynamic capabilities and competitive
3. Research Methods
3.1. Sample and Data Collection
This study was explanatory research using a quantitative method approach. The research was conducted over three (3) months (March-May 2020) and studied shipping agency companies in Indonesia that engaged in managing foreign and domestic vessels in Indonesian seaports. The population was shipping agency companies that were members of the Indonesian Shipping Agency Association (ISAA). In February 2020, there were 512 shipping agency companies in Indonesia of which 220 were a member of ISAA that spread across 22 of the 34 Indonesian provinces. The samples were determined proportionally based on the total population in each province using the Slovin formula with an error tolerance level of 5%. The sample comprised 143 companies from a population of 220 companies and represented by the director or general manager, who was assumed to be the most knowledgeable about company-related issues. The sampling technique was carried out randomly drawing lots. The research instrument was a questionnaire distributed to the target participants using a google document survey link online. The data was measured using a 6-point Likert scale measurement ranging from 1. Strongly disagree 2. Disagree 3. Slightly disagree 4. Slightly agree 5. Agree, and 6. Strongly agree.
3.2. Measurement
The measurement of the research variables was based on the framework of the research constructs which consisted of four variables – one (1) exogenous variable (Dynamic Capabilities) and three (3) endogenous variables (Entrepreneurial Creativity, Ambidextrous Innovation, and Competitive Advantage). The study framework used a second-order depth level where each variable is described from the indicators and the indicator is described from the items. The variable dynamic capabilities have three (3) indicators – sensing, learning, and reconfigurating. Each of these indicators has four (4) items adapted from MacInerneyMay (2012). The variable entrepreneurial creativity has two (2) indicators – originality and new venture. Each of these indicators has four (4) items adapted from Hills et al. (1997) and Puhakka (2005). The variable ambidextrous innovation has two (2) indicators – exploitative innovation and explorative innovation. Each of these indicators has four (4) items adapted from Atuahene-Gema (2005) and He & Wong (2004). The variable competitive advantage has two (2) indicators - taking advantage of all opportunities and neutralizing all threats. Each of these indicators has four (4) items adapted from Sigalas et al. (2013). The description of the items for each indicator was developed into a questionnaire.
3.3. Analysis Method
This study examined the effect of dynamic capabilities on competitive advantage with entrepreneurial creativity and ambidextrous innovation mediation. Research instrument test (validity and reliability test) were performed for items and descriptive analysis of responses using SPSS 18.0. Factor analysis and research model analysis (convergent validity, discriminant validity, composite reliability, the goodness of fit, and research hypothesis) was performed using the SEM WarPLS 7 series software.
4. Results
The questionnaire instrument was tested for 30 companies represented by 24 directors (24 companies) and 6 general managers (6 companies) and the validity test showed that all of the items (34 items) for the four variables had a Pearson correlation above 0.3 except one (1) item below 0.3 (item of learning indicator - dynamic capabilities variable). Therefore, this item should be discarded and not used as a questionnaire item. This means that the other 33 items are valid. Reliability showed that all of the items (33 items) for the four variables had Cronbach’s alpha coefficient values of 0.6. Therefore, all items were declared valid and reliable.
4.1. Respondent Profile
The respondents were new shipping agency companies, of which 71.9% of the companies were less than 3 years old, of which 76.2% have less than 25 employees, and of which 74.1% have less than 3 branch offices. In general, the respondents were newly established companies with a smaller number of employees and small regional service networks.
4.2. Variable Description
The researchers interpreted the mean interval using the Sturges formula. The average value of the dynamic capabilities variable is 5.04 that was in the high category and most of the responses (81%) were ‘agree’ and ‘strongly agree’. The most important item in the sensing capability indicator is the organizational change in the port authority and the most important item in the learning capability indicator is the port net service system and the most important item in the reconfiguration capability is the system that suits the customer. However, the most important indicator of the dynamic capabilities variable is learning capability. Thus, respondents considered that the empowerment of dynamic capabilities needs to focus on the learning capability empowerment.
The average value of the entrepreneurial creativity variable is 5.01 that was in the high category and most of the responses (82%) were ‘agree’ and ‘strongly agree’. The most important item in the originality indicator is the profitable creativity culture while the most important item in the new venture indicator is the new service system. However, the most important indicator in the entrepreneurial creativity variable is originality. Thus, the respondents considered that building a profitable creativity culture is more important than other efforts in entrepreneurial creativity.
The average value of the ambidextrous innovation variable is 4.99 that was in the high category and most of the responses (77%) were ‘agree’ and ‘strongly agree’. The most important item in the exploitative innovation indicator is a service system that focuses on effectiveness and efficiency while the most important item in the exploratory innovation indicator is creating a new service system. Based on these findings, respondents assumed that creating a service system that focuses on effectiveness and efficiency even though it is in the form of a new service system is important to produce ambidextrous innovation.
The average value of the competitive advantage variable is 5.09 that was in the high category and most of the responses (78%) were ‘agree’ and ‘strongly agree’. The most important item in the indicator of taking advantage of all opportunities is the relationships with customers in creating new businesses and the most important item in the indicator of neutralizing all threats is the relationships with authorities in anticipation of policy changes. However, the most important indicator in this variable is the neutralization of all threats.
4.3. Validity and Reliability
Validity and reliability test were carried out to confirm the instrument validity and reliability found in the pretest. The convergent validity test as shown in Table 1 showed that all items and indicators had a loading factor value above 0.60 which means these results met the convergent validity requirements (Hair et al., 2011). The discriminant validity test as shown in Table 2 showed that all indicators and variables had an AVE (average variance extracted) value greater than 0.5 which means these results met the discriminant validity requirements (Hair et al., 2011). The reliability test as shown in Table 3 showed that all variables had Cronbach’s alpha value above 0.7 and composite reliability value above 0.60 which means these results met the reliability requirements (Hair et al., 2011).
Table 1: Item and indicator Convergent Validity
Table 2: Indicator and Variable Discriminant Validity
Table 3: Composite Reliability and Cronbach’s Alpha
4.4. The Goodness of Fit
The goodness of fit was assessed using R-squared which is the proportion of endogenous variables that can be explained by exogenous variables and Q-squared which is the relevance of a set of exogenous latent variables to endogenous variables. The test results showed that the R-squared value of all variables was above 0.67 which indicated a strong level and the Q-squared value of all variables was above 0.35 which indicated a better data fit as shown in Table 4. The final step in assessing the feasibility of the model was conducting the goodness of fit test with the WarPLS approach as shown in Table 5, which indicated that all indicators met the goodness of fit criteria. Therefore, we concluded that the research model fulfilled the goodness of fit requirements.
Table 4: The Goodness of Fit Structural Model
Table 5: Model Fit and Quality Indices
4.5. Hypothesis Test
The hypothesis test as shown in Table 6 found that one (1) hypothesis unsupported hypothetical relationship between variables. The relationship between dynamic capabilities and competitive advantage had a positive relationship but not significant, therefore H1 was rejected. The relationship between dynamic capabilities and entrepreneurial creativity and the relationship between dynamic capabilities and ambidextrous innovation was significant, therefore H2 and H3 were accepted. The influence of entrepreneurial creativity on competitive advantage and the influence of entrepreneurial creativity on ambidextrous innovation was significant, therefore H4 and H5 were accepted. The influence of ambidextrous innovation on competitive advantage was also significant, therefore H6 was accepted. The indirect relationship between dynamic capabilities and competitive advantage when mediated by entrepreneurial creativity was significant, therefore H7a was accepted. The indirect relationship between dynamic capabilities and competitive advantage, when mediated by ambidextrous innovation was also significant, therefore H7b was accepted. In conclusion, the role of entrepreneurial creativity and ambidextrous innovation in mediating the influence of dynamic capabilities on competitive advantage was a complete mediation or perfect mediation variable.
Table 6: Hypothesis Testing
Note : ** indicates significant on level 0.01 (1%).
Analysis of the research model was conducted by determining the effect of exogenous variables on endogenous variables through the analysis of the result as a whole (not partially) by looking at the results as a whole (not partially). The indirect effect and the total effect of dynamic capabilities (exogenous variable) on competitive advantage (endogenous variable) had a path coefficient of 0.700 with a p-value of <0.001. Therefore, the absolute contribution of the dynamic capabilities to competitive advantage was (0.700)2 x100% = 49% which means that the strength of dynamic capabilities on competitive advantage is 49%; therefore, the efforts to increase competitive advantage for the company must be done by improving dynamic capabilities along with entrepreneurial creativity and ambidextrous innovation. Therefore, empowering dynamic capabilities, entrepreneurial creativity, and ambidextrous innovation is crucial for improving competitive advantage.
5. Discussion
Empowerment of new business venture’s dynamic capabilities did not show a significant effect on competitive advantage even though their relationship is unidirectional and positive. This finding was not consistent with previous empirical studies that resulted in a significant positive and unidirectional relationship. This insignificant finding was due to new business venture having limited resources, access, reputation, and legitimacy in the competitive market compared with established companies. The empowerment of dynamic capabilities not having a significant effect on competitive advantage was also due to the choice of strategies used in responding to environmental changes between the stabilization approach and the pioneering approach. The stabilization approach is more appropriate to be applied in an environment that is less competitive and less dynamic. On the contrary, a pioneering approach is best to be used in a very tight and dynamic competition. The existence of strategic actions in the form of entrepreneurial creativity and or ambidextrous innovation was an effort to achieve the firm’s competitive advantage through dynamic capabilities empowerment. Empowering dynamic capabilities with those mediating variables was a form of unique competency development and resource management within the company. To have a competitive advantage, new business ventures must create a high-level breakthroughs innovation. Furthermore, the significant effect of entrepreneurial creativity on competitive advantage (H4) and ambidextrous innovation (H5) indicated that original creativity idea and a new venture was capital for new business ventures to achieve the firm’s competitive advantage.
Using the model proposed in this study, it is shown that a new business venture’s competitive advantage can be determined by 70% (strong level) of dynamic capabilities mediated by entrepreneurial creativity and ambidextrous innovation. It can be concluded that the influence of dynamic capabilities on competitive advantage accounted for 49% absolute contribution. To achieve a competitive advantage, new business ventures need to increase the dynamic capabilities empowerment along with strategic actions in the form of entrepreneurial creativity and ambidextrous innovation.
It cannot be denied that there are limitations in the scope of this study so that there is an opportunity for further research to study the relationship between dynamic capabilities and competitive advantage for new business venture especially related to population size and business type of the companies. Moreover, this study is still limited to the age range and creative culture of the new business ventures to examine the empowerment of dynamic capabilities in generating creativity and breakthrough innovations.
6. Conclusion
This study found that empowerment of new business venture’s dynamic capabilities for new companies had no significant effect despite having a positive relationship with a competitive advantage. Since new business venture background generally having limited resources, access, reputation, and legitimacy in the competitive market compared with established companies, empowerment of new business venture’s dynamic capabilities is not sufficient to achieve a competitive advantage. This study also found that empowerment of new business venture’s dynamic capabilities had a significant effect on competitive advantage through strategic actions such as entrepreneurial creativity and ambidextrous innovation mediation in the relationship between dynamic capabilities and competitive advantage. Based on the findings in this study, it can be concluded that to achieve a firm’s competitive advantage by the empowerment of dynamic capabilities with ambidextrous innovation and entrepreneurial creativity mediation is important for a new business venture in facing intense competition in a dynamic environment condition. With limited resources, access, legitimacy, and reputation, new business ventures need to develop dynamic capabilities through reconfiguring resources and taking strategic actions in the form of entrepreneurial creativity and ambidextrous innovation.
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