ISSN (Print) : 0974-6846

Indian Journal of Science and Technology, Vol 11(11), DOI: 10.17485/ijst/2018/v11i11/118692, March 2018 ISSN (Online) : 0974-5645

How can Small and Medium-sized Enterprises

Maximize the Benefit Derived from Strategic
Flexibility? The Moderating Effect of Contextual
Ambidextrous Learning
Meghdad Ahmadi1* and Mohd. Hasan Mohd. Osman2
University Technology Malaysia-International Business School, Kuala Lumpur,
1

Malaysia; ahmadi.meghdad@gmail.com
2
University Kelantan Malaysia, Kelantan – 16100, Malaysia; hassan.osman@umk.edu.my

Abstract
Objectives: Controversial results are found in literature regarding the influence of strategic flexibility to SMEs’
performance, which is related to lack of understanding about the contextual factors required for its optimal functioning.
Thus, it is necessary to conduct a study to investigate the contextual condition enhancing the effect of flexibility. Methods/
Statistical Analysis: Using a quantitative research method, this study examined the proposed model in Medium Tech
Iranian manufacturing SMEs. Sample includes 60 SMEs which have been chosen through stratified sampling technical.
Factor analysis is used for measurement assessment indicating high reliability and validity of the instrument. In order to
test the hypothesis, this study has applied hierarchical regression analysis to test the moderating effect of ambidextrous
learning on strategic flexibility–performance relationship. Findings: The relationship between flexibility consisting of both
action and resource reconfiguring flexibility and SMEs’ performance is approved in this study. Contextual Ambidextrous
Learning is also found as the required contextual factor moderating this relationship. The result is in line with studies that
are in favor of necessity of both Exploitative and Explorative innovation strategies for SMEs. Application/Improvements:
The result from study has examined and approved a hierarchical relationship between levels of dynamic capabilities and
has shed light on application of dynamic capabilities in handling strategy execution in SMEs.

Keywords: Contextual Ambidextrous Learning, SMEs, Strategic Flexibility

1. Introduction operational level enhancing the effect of manufacturing

Current research stream on strategic management empha-
size on considering a multi-level orientation on strategic
change1. In2 emphasizes on multi-level orientation to stra-
tegic change and calls for research on boundary crossing
of levels of analysis on strategic change. In3 proposed a
moderating relationship with ambidexterity enhanc-
ing the effect of execution of hybrid strategies. In4 has
highlighted necessity of taking a multi-level view to stra-
tegic management with ambidextrous learning at the
flexibility5 has emphasized on the interaction effect of
ambidextrous learning and flexibility in firms.
Although flexibility is considered as an important
dynamic capability6,7 which is driver of firm competi-
tive advantage in turbulent environments, existing stud-
ies show controversial results regarding the relationship
between strategic flexibility and firm performance8,9.
There is common belief in literature on strategic manage-
ment that having the dynamic capability of strategic flex-
ibility is not sufficient for gaining sustainable competitive

*Author for correspondence

 How can Small and Medium-sized Enterprises Maximize the Benefit Derived from Strategic Flexibility? The Moderating Effect of
Contextual Ambidextrous Learning
advantage and the impact of on firm performance is con-
text-dependen10,11. There is call for research investigating
the conditions under which Dynamic Capabilities can
perform better12,13. This is supported by evidences indi-
cating that in spite of having dynamic capabilities such
as strategic flexibility, some firms are not benefiting from
that.
However, in spite of importance of context, the
boundary conditions or the context under which strategic
flexibility should work is not fully studied. Most studies
have considered the external context, while few studies
have taken the internal condition or context into consid-
eration. Inconsistencies among existing studies highlight
the need for future research to pay closer attention to
dimensions and context related to strategic flexibility14.
This research aims to firstly determine the dimensions of
strategic flexibility from a dynamic oriented view and sec-
ondly find the internal contextual factors contributing to
enhancing the effect of Strategic flexibility.
2.  Hypothesis Development
2.1  Strategic Flexibility and Performance of
SMEs
Strategic flexibility reported as a dynamic capability makes
significant contributions to firms’ performance by imple-
menting deliberate changes enabling the firm to adjust
itself to changes15. Conceptualizing strategic flexibility
as a dynamic capability, it can contribute to performance
through two paths. Firstly, it functions by developing new
processes, products, which has the potential to increase
revenue16–18. Strategic flexibilities considered as a dynamic
capability can also act as a means of updating the opera-
tional routines or operational capabilities19,20 in fact by
reconfiguring the operational capabilities, they will be
able to adjust and enhance the quality and reduce the cost
of their operation leading to higher performance in tur-
bulent environments.
There are both reactive and proactive strategic actions
taken by a firm. The proactive actions mostly focus on
product domains, while reactive actions emphasize on
process domains. Having sensed the “Strategically relevant
components of a company’s external environment21, firms
can take actions. Sensing activities could include sensing
the industries dominant economic features (e.g. market
2 Vol 11 (11) | March 2018 | www.indjst.org
size and growth rate, degree of product differentiation).
For instance, Sensing the market size and growth rate, a
flexible firm will be able to find out about the industries
position in the product life cycle, which can give insight
on the volume of production enabling firm to take capac-
ity related anticipative strategic actions. In addition, by
sensing driving forces of change (e.g. product innovation)
firms can come up with new product development as an
indicator of strategic flexibility. Finally, by sensing and
assessing the cost competitiveness of value chain activities
or operating routines compared to rivals and the indus-
tries vale chain, firms can have corrective strategic actions
to remedy the cost disadvantage. For example, in cases of
cost disadvantages due to internal factors, companies can
start revamping the value chain.
Sensing, seizing and reconfiguring activity com-
ponents making up the proactive and reactive strate-
gic actions are in charge of reconfiguring or modifying
both processes and products leading to creating novelty
or improvement in either products or processes. Such
improvement or novelties known as innovation perfor-
mance and result in higher organizational performance.
Empirical evidences have suggested that having a vari-
ety of strategic actions and shifting between actions can
bring about positive effect on business performance22.
Thus, considering SMEs’ need to avoid deficiency in their
operations due to limited access to financial supports in
dynamic environment, it can be hypnotized that strate-
gic action flexibility denoting the dynamic capability of
the firm to make changes and modification in its operat-
ing routines and coming up with product development is
likely to lead to improved or new product-process domain
leading to higher performance in SMEs.
H1: There is positive relation between strategic action
flexibility and performance of SMEs.
2.2  Resource Reconfiguring Flexibility
complementing Action Flexibility
In dynamic environment, building sustainable com-
petitive advantage is difficult because firms cannot long
protect existing products and processes23. Firms cannot
sustain above-average profits based on a single estab-
lished innovation or advantage in these environments.
To survive in such business environment, firms must
carry out frequent strategic and organizational changes.
Strategic flexibility is the capability of the firm to proact
Indian Journal of Science and Technology

or responds quickly to changing competitive conditions
and environment24.
In order to show quick and frequent responses, firms
should own the capability of making shift in its resource
allocation. This is related to the fact that different strat-
egies require different type and amount of resources.
Companies need to marshal the resources behind the
strategy critical activities which are required to follow25.
The resources should back up the new strategic initiatives
and establish the appropriate level to the right place in
the organization which is likely to contribute in imple-
mentation of the strategy. Thus, flexibility of resource
deployment is likely to contribute in enabling firms to
gain higher profit.
It is expected that modifying the resource allocation
can lead to higher performance of strategic flexibility
since it is capable of eliminating the high cost which is
one of the reported disadvantages of strategic flexibility
hindering SMEs from being committed to flexibility. The
stable and persistent pattern of resource deployment may
not work for SMEs in fast Changing Environment, where
products, processes and competitive actions are changing
rapidly and competitive advantage is short lived. Stability
in resource deployment may lock company resources
into products and processes that may become outdated,
adversely affecting performance. Based on the above
reasoning, strategic flexibility should possess the mecha-
nisms for coming up with the options and mechanisms
letting the firm to quickly shift between options. Strategic
flexibility depends jointly on action flexibility and the
company’s organizational flexibilities in applying appro-
priate resources to alternative courses of action26. Thus it
can be hypnotized that:
H3: Effect of action flexibility on Performance of
SMEs is stronger when resource reconfiguring is along
with action Flexibility.
2.3  Moderating Effect of Contextual
Ambidextrous Learning
Strategic flexibility is related with firms’ strategic capabil-
ity to be capable of recalibrating their strategies when the
environment is dynamic, which is a key factor for gain-
ing competitive advantage18. However, Thompson, et.al.
addresses the need for a superior capability enabling the
company to take action at the right time and in the right
way. In fact, in order to remodel and update c­apabilities,
Vol 11 (11) | March 2018 | www.indjst.org
Meghdad Ahmadi and Mohd. Hasan Mohd. Osman
a firm has two choice either to exploit the external
resources, (e.g. benchmarking the best practices) or invest
internally for internal exploratory learning.
For organizations with Conservative identity such as
SMEs suffering from slack resources, it is difficult to mar-
shalize the resources behind the new strategic initiative
in case the actions are cyclically separated, (punctuated
equilibrium). Besides, their small size does not let them
to practice two types of strategies simultaneously in dif-
ferent business units, known as structural ambidexterity.
Thus, it is expected that contextual ambidextrous learning
enables the firms to take effective strategic actions more
responsively. Contextual ambidextrous learning rests on
the premise that firms can benefit from synergic effect
from coexistence of both types of strategies in the same
business unit with exploitation executed through external
sources for either process improvement or improvement
on current products and at the same time, exploration
conducted internally for new product development or
production process innovation.
Based on the conceptualization of components of
dynamic capabilities presented27,28 which highlights the
importance of activities directed at generating, acquiring,
integrating and disseminating knowledge for reconfigur-
ing organizational processes and from a dynamic capabil-
ity perspective, a firm’s ability to develop and implement
innovations should be embedded in various external
and internal interrelated activities29,30 addressed a broad
range of innovation-related activities as dynamic capa-
bilities. These activities include both internal conducting
in-house R&D and prototyping and acquiring external
knowledge through R&D outsourcing. It is clear that
acquisition of knowledge is conducted from two various
origins of external sources and internal knowledge gen-
eration in studies looking at innovation from a dynamic
capability point of view. The joint occurrence of these
internal and external knowledge acquisition activities
proposes a complementarily relationship between these
activities, since the marginal return to one activity rises
as the level of the other activity goes up. Thus, contextual
ambidextrous learning is expected to provide an optimal
tray of resource for updating the capabilities leading to
increasing the effectiveness of strategic flexibility. Thus, it
can be hypnotized that:
H3: Contextual Ambidextrous Learning moderates
the relationship between strategic flexibility and perfor-
mance of SMEs.
Indian Journal of Science and Technology 3
 How can Small and Medium-sized Enterprises Maximize the Benefit Derived from Strategic Flexibility? The Moderating Effect of
Contextual Ambidextrous Learning
3. Methodology
SMEs are considered as an appropriate context for
conducting research on the relation between strategic
flexibility and performance because of high costs related
to caring out strategic flexibility, which appeals for inves-
tigating if they are a suitable context for conducting
strategic flexibility or not since they are engaged in issues
of limited resources. Secondly previous research has pro-
posed that SMEs are an ideal context for examining the
effects of ambidexterity. In31 argue that small businesses
or divisions of a corporation are the suitable context for
OA research. For large, multi-division companies, OA
may take the form of structural ambidexterity in which
each Subunit focuses on either exploration or exploita-
tion and thus, at the corporate level the firm achieves OA
because it involves in both exploration and exploitation
simultaneously. Lacking resource slacks and having sim-
ple organizational structures, small businesses offer an
intriguing context for OA research32.
In other step taken in identifying the population,
the target population of the study is among the manu-
facturing companies. With regard to importance of new
product development and necessity of supporting the
manufacturing sectors this study ignores the SMES in
the service sector. Besides most of the SMEs in this sec-
tor have been widely inaugurating the strategic orienta-
tion in their companies. Thus, due to the widespread and
prolonged use strategy making in such industry, it could
be an appropriate population for the study. In addition,
with the emerging land marks in globalization and spe-
cifically the removal of the sanctions and new perspec-
tive for commerce between Iranian industries and foreign
countries. The Iranian manufacturing SMEs are the sec-
tor which account to the value that can be created for the
economy of the country, thus this study addresses this
sector as they can play an important role for the economy
of IRAN.
3.1  Measure and Validity
The construct for strategic flexibility is taken from the
previous studies on strategic flexibility. It composes two
dimensions of Resource Flexibility and Action flexibil-
ity according to the drawn theoretical model. In case of
the construct for action flexibility, the study considers
reactive, anticipative and proactive types of actions. In
addition, complexity of action is also taken into account.
Resource Flexibility was measured as the ability of the
4 Vol 11 (11) | March 2018 | www.indjst.org
firm in reallocating resources for different uses and easi-
ness of switching resource allocation among various uses.
Moderating Variable of Ambidexterity is constructed
by measuring both explorative and exploitive orientation
of top managers in strategy execution. Respondents have
expressed their orientation toward both explorative and
exploitive learning. The scale is adopted from the twelve
item established construct measures the extent a com-
pany focuses on current product–market domain versus
the new product–market domain.
In this study, similar to most studies in strategic man-
agement, financial performance and innovation perfor-
mance are taken as indicators of overall performance.
When monitoring SMEs’ performance, it is necessary to
use a combination of financial and non-financial indica-
tors. So, key performance indicators for an SME may be
financials and non-financials33.
The financial performance of a firm is measured in
terms of its profitability and growth in sales. Financial
performance was measured using five items originally
developed by Powell in34 and used in other study35. This
scale captures the extent to which growth and financial
performance have been outstanding based on the firms
predetermined objectives and whether they have been
considered to be superior to competitors over the previ-
ous three years. This scale has demonstrated high corre-
lations with objective measures of performance such as
ROA and ROS.
Innovation performance has addressed the newness
and competiveness of both products and processes in
firms. The scale has been adopted from36. The strength
of the instrument is measuring both product and process
innovation via multiple perspectives, for example number
of products, speed of new product development and level
of newness37. According to Leaven good, it is possible to
measure innovation via a single construct, researchers
must determine if it is appropriate or desirable given the
specific objectives of the research at-hand. For example,
if studying relationships between management practices
and innovation in general terms, it may be sufficient to
simply conceive of innovation as a single construct.
The reliability and validity of all the constructs are
measured. Cronbach’s alpha were all over the threshold of
0.70 showing the reliability of the constructs. Convergent
validity was tested by AVE statistics. The AVE of each
variable in this study is 0.50 or above, demonstrating
adequate convergent validity proposed. Second, it was
assessed by factor loading statistics. As Table 1 shows,
Indian Journal of Science and Technology
 Meghdad Ahmadi and Mohd. Hasan Mohd. Osman

Table 1.  Validity and reliability

Factor Item Loading AVE a
Strategic
0.86 .907
Flexibility
We anticipate changes by regular sensing of the industry dominant features and
.978
make adjustment (volume of production)
We anticipate change by regular sensing of the driving forces of change and seizing
.974
protective actions (installing buffers)
We react to changes by modify the value chain processes or operating routines
.966
(bench marking the best practices in the industry)
Strategic action
flexibility We react to change by revamp the value chain processes or operating routines
.916
(outsourcing some activities)
We are proactive leading agents of change by initiating time paced fresh actions
every few months (Introducing new or improved product to market every four .956
months)
We have Diverse strategic actions and we frequently change our strategic actions and
.954
structures to derive benefits from environmental changes
Marshaling the recourses behind the new strategic initiatives and steer them to the
.809
appropriate organizational unit is important.

There is a large range of alternative uses to which our major resources can be applied .794

The difficulty of switching from one use of our major resources to an alternative use
Recourse .873
is low
Flexibility
The time required to switch to an alternative resource use is short. .908
The costs of switching from one use of our major resources to an alternative use are
.980
low.
The major resources can be allocated to develop, manufacture, and deliver a diverse
.980
line of products.
Learning 0.88 .965
My firm looks for novel technological ideas by thinking “outside the box”.
.914
(Exploratory 1)

Explorive My firm bases its success on its ability to explore new technologies. (Exploratory 2) .915
learning(the first My firm creates products or services that are innovative to the firm. (Exploratory 3) .914
6 items)
My firm looks for creative ways to satisfy its customers “needs. (Exploratory 4) .842
My firm aggressively ventures into new market segments. (Exploratory 5) .995
My firm actively targets new customer groups.(Exploratory6) .985
My firm commits to improve quality and lower cost. (Exploitative 1) .905
My firm continuously improves the reliability of its products and services.
.939
(Exploitative 2)
Exploitive
learning(the last 6 My firm increases the level of automation in its operations. (Exploitative 3) .937
items)
My firm constantly surveys existing customers ‘satisfaction. (Exploitative 4) .974
My firm fine-tunes what it offers to keep its current customers satisfied. (Exploitative 5) .931
My firm penetrates more deeply into its existing customer base. (Exploitative 6) .898

Vol 11 (11) | March 2018 | www.indjst.org Indian Journal of Science and Technology 5
 How can Small and Medium-sized Enterprises Maximize the Benefit Derived from Strategic Flexibility? The Moderating Effect of
Contextual Ambidextrous Learning

Performance 0.76 .958

Over the past 3 years, our financial performance has been
.984
outstanding
Over the past 3 years, our financial performance has exceeded our competitors .989
Financial Over the past 3 years, our revenue (sales) growth has been
.893
performance outstanding
Over the past 3 years, our revenue (sales) growth has exceeded our competitors .736
Over the past 3 years, we have been more profitable than our
.737
competitors
0.87 .938
The level of newness (novelty) of our firm’s new products. .978
The use of the latest technological innovations in our new products. .972
The speed of our new product development. .889
The number of new products our firm has introduced to the market. .869
Inovation The number of our new products that is first-to-market (early market entrants). .978
performance
The technological competitiveness of our company. .723
The speed with which we adopt the latest technological innovations in our processes .788
The level of newness (state-of-the-art) of the technology used in our processes. .870
The rate of change in our processes, techniques and technology. .743

factor loadings of the items exceed the threshold value of all independent variables and the dependent variable are
0.70, an indication of high convergent validity. significantly correlated with each other, signifying that
the theoretical model is potentially worth studying. To
3.2  Descriptive Statistics ensure that our results are not affected by multi collinear-
ity, we centered all independent variables before creating
Descriptive statistics and correlations are reported in
product of these variables proposed.
Table 2 strategic flexibility is positively related to firm
performance (0.738, p, 0.001), providing some initial sup-
port for our argument concerning the positive impact of 4. Result
strategic flexibility on SME performance. Furthermore,
Hierarchical regression analysis was used to test the
hypotheses. Five models are tested to identify the predic-
Table 2.  Descriptive statistics
tors of SMEs performance as shown in Table 3. Model
Mean Standard deviation 1 intends to assess hypothesis 1, the effect of strategic
1. Overal Firm performance 3.267 .8948 flexibility. Models 2, 3 and 4 try to find how action and
2. Finantial performance 3.209 .87107 resource flexibility can affect on performance above each
other. Model 4 is a saturated model which tries to deter-
3. Innovation Performance 3.366 1.0774
mine the relative importance of the two variables on firm
4. Strategic flexibility 3.418 .68624 performance. Finally, Model 5 is the full model examin-
5. Action flexibility 3.691 1.1509 ing the effect of moderating Ambidexterity on strategic
6. Resource flexibility 3.144 .83331 flexibility.
In Model 1, this study added the strategic flexibil-
7. Explore Learning 2.572 .92586
ity. The results show that the coefficient of the strategic
8. Exploit Lerning 3.755 1.0077
flexibility is significant and positive. In order to test the
9. Ambidex Learning 3.163 .75554 importance of both Action and Resource Flexibility,
10. Environment dynamism 3.408 .5287 Models 2 and 3 yield more information. As can be seen in

6 Vol 11 (11) | March 2018 | www.indjst.org Indian Journal of Science and Technology
 Meghdad Ahmadi and Mohd. Hasan Mohd. Osman

Model 2, Action effect is positive and significant B = .127,
P = 0.001. However the result from Model 3 shows that
the resource–performance yields the least significance
p = 1.00. In order to test how action effect on perfor-
mance functions along with resource, a saturated model
is tested in Model 4. The result shows that with adding the
resource to the model, the influence of action on perfor-
mance becomes more significant, and increases from .120
to .170, p = .000. Besides, the recourse influence becomes
significant p = .05. The results show that resource flexibil-
ity indeed contributed to the model. These results suggest
that although Action flexibility is more important than
resource flexibility, for the strategic flexibility to work out
in best condition, action should be accompanied with
resource dimensions of flexibility. To test the moderate
effect of ambidexterity, all the relevant interactions were
entered to run Model 5. Model 5 shows that the interac-
tion of ambidexterity in strategic flexibility is positive and
significant with B = .120 and P = .05. Besides in the full
model the effect of flexibility is almost doubled increased
from .170 to .290 and also there is a change of .05 in R2
value. Therefore, H3 is supported. The result from the
study implies that the full model is the best model pre-
dicting SMEs performance.
5. Discussion
This part justifies results from the study and supports
the findings with that of previous studies from four per-
spectives. First, we give explanation on importance of
resource reconfiguring to be along with action flexibil-
ity. After that, the hierarchical relationship of strategic
change and ambidextrous learning and also contribu-
tion of contextual ambidexterity to SMEs’ performance is
elaborated. Then, simultaneous execution of both process
and product innovation is explained for SMEs and finally,
the effectiveness of considering both external and internal
path to implementing innovation strategies is justified.
The saturated model has shown that strategic flex-
ibility with both action flexibility and recourse flexibility
yields a more significant relation with performance. In
fact, the result from this study highlights the importance
of considering recourse reconfiguring activity combined
with action flexibility for the flexibility to work out as a
dynamic capability. Firms with high resource modifying
capabilities are able to pursue new strategic actions with
novel resource portfolios, thus enabling strategic change
to work by shortening the cycle of adjusting strategies to
respond to turbulent environments.
Basically, strategic flexibility or implementing diverse
actions including proactive product innovation and
reactive process innovation strategies is along with con-
straints on firms’ resources. The execution of diverse
strategies fuels competition for scarce resources. In fact
sharing the resources such as production facilities, mana-
gerial resources and marketing channel becomes diffi-
cult. Resource portfolios are often bounded with current
products and strategies and thus often become barriers
for exploratory (proactive) strategies. In fact, this creates
difficulties sharing and employing the existing resource

Table 3.  Regression analysis

variable Model 1 Model 2 Model 3 Model 4 Saturated Model 5; Saturated with Interactions
Control
Environment
.157* * * .327* * * .261* * .193* * * .158* * * .159* ** -1.533* * *
dynamism
Main effect
Strategic flexibility .176* * * .178* * * .290* * *
Action flexibility .099* * .127* * .162* * *
Resource flexibility .000a .074*
Ambidexterity .748* * * .800* * * .792* * * .787* * * .759* * * .746* * * .722* * *
Interaction Effect
Ambidex × Flex .103*
R2 .952 .948 .938 .948 0. 953 .952 0.957
Notes: a = P≤ 0.10; *p ≤, 0.05; * *p ≤, 0.01; * * *p≤ , 0.001; n = 60

Vol 11 (11) | March 2018 | www.indjst.org Indian Journal of Science and Technology 7
 How can Small and Medium-sized Enterprises Maximize the Benefit Derived from Strategic Flexibility? The Moderating Effect of
Contextual Ambidextrous Learning
base. This is also stated38 as the current resources are
intensely bounded to specified targets and it is difficult for
firms to employ them for other courses of actions. Thus
in such case going for complementary resources for new
product development becomes difficult.
In such cases, resource reconfiguring activities can
compensate for this limitation facilitating development
of new products resulting in higher performance. In this
case, the extended resource pool may enable firms to
conduct a higher level of proactive new product develop-
ment without resource competition. High resource flex-
ibility reduces the risk and cost to find complementary
resources for new knowledge or new technologies39.
The result has also shown that the impact of strategic
flexibility on firm performance is contingent on contex-
tual ambidextrous learning. Approving such multi-level
orientation to strategic change and ambidexterity is a
response to call for research on boundary crossing of lev-
els of analysis on ambidexterity. In line with March topol-
ogy in favor of simultaneous execution of both strategies
with the same business unit, the result from current study
approves the effectiveness of contextual ambidexterity
as found40 in their studies on SMEs. In fact, contextual
ambidexterity provides the strategy mechanism with the
benefit of an enforcing synergic effect coming from both
explorative and exploitive learning increasing the respon-
siveness of strategic actions. In line with this argument41,42
argue that due to uncertain identity of innovation success,
companies will be able to enhance the possibility of suc-
cess by taking a wider scope of multiple innovation mea-
sures simultaneously.
Firms with contextual ambidexterity reutilize inno-
vation and enrich individuals’ jobs through non-routine
tasks enabling firms to respond flexibly43. Highly ambi-
dextrous firms improve existing processes while con-
sidering new processes. This capability can enhance
manufacturing responses, improve quality, reduce costs
and contribute to positive firm performance outcomes44,45.
Ambidextrous firms explore new technologies while
improving existing technologies. In an environment
characterized by high uncertainty, these capabilities can
improve a firm’s ability to respond efficiently and effec-
tively with flexible manufacturing processes, leading to
better performance.
The third part of our discussion tries to justify the
simultaneous external and internal paths to innovation.
The logic underling coexistence of the complementary
relation between internal R&D and external technology
8 Vol 11 (11) | March 2018 | www.indjst.org
acquisition can be supported by the necessity of “positive
knowledge spillovers” between internal R&D and alli-
ances. The result from certain studies supports the idea
that the effectiveness of external acquisition of knowledge
such as R&D outsourcing and R&D cooperation relies on
firms’ in-house R&D activities.
In fact, in case companies are to choose R&D partners
and effectively cooperate with them, they should have
conducted a certain level of internal knowledge genera-
tion through R&D. These results are in line with Cohen
and Levinthal’s concept of absorptive capacity, indicat-
ing that a company’s capability to identify, assimilate and
exploit externally generated knowledge is a function of its
former “related knowledge accumulated through internal
R&D.
Finally, in the last part of our discussion, necessity of
both process and product innovation for SMEs is explained
and supported from previous studies on innovation in
SMEs. SMEs must continually seize new opportunities in
order to sustain a competitive advantage by developing
new products and to innovate46 and also simultaneously
manufacturing SMEs in particular must continuously
improve their manufacturing processes in order to ensure
long-term sustainability47. Such simultaneous adoption of
both types of innovation is supported48–51 in their study on
determining innovation in SMEs.
Have examined the simultaneous coexistence of pro-
cess and product innovation as an input for the productiv-
ity function of SMEs and have shown that though process
innovation makes more significant contribution to SMEs’
productivity, a minimum level of Product innovation or
R&D is necessary. The logic behind this result is that such
level of R&D is necessary for the process innovation to
benefit from spillovers.
6. Conclusion
Drawing on dynamic capabilities perspective, this study
tries to uncover the internal boundary conditions of the
effect of strategic flexibility on firm performance. In fact,
benefiting from hierarchical oriented view to composi-
tion of dynamic capabilities and considering distinct role
for lower level and higher level of dynamic capabilities,
this study finds support for proposing strategic flexibility
as a lower level dynamic capability and contextual ambi-
dextrous learning as a higher level dynamic capability.
The result from the study has broadened the scope of
research on ambidexterity by considering a multiple level
Indian Journal of Science and Technology

strategy mechanism. In fact, with theoretical advances in
research on dynamic capability introducing hierarchical
relationship, the current study has moved forward the
research on innovation strategies by approving the influ-
ence of ambidextrous learning on the effectiveness and
responsiveness of executing diverse strategies.
The positive effect of strategic flexibility as a dynamic
capability inheriting both action and resource reconfigur-
ing on SME performance has a greater statistical signifi-
cance than those of action and resource individually. This
implies that for the flexibility to work out, in addition to
benefiting from reactive, anticipative and proactive actions,
it should be accompanied with resource reconfiguring
activities. Theoretically, by drawing on dynamic capabilities
perspective, this study provides a refreshed understanding
of strategic flexibility and refines boundary conditions of
the effect of strategic flexibility on firm performance. From
the dynamic capabilities perspective, strategic flexibility
deemed as an important type of dynamic capability should
be aligned not only with external environments, but also
with internal environments such as organizational learn-
ing activities to take full effect. The study visualizes the
future direction of the study by addressing the attention of
researchers to conduct qualitative study on antecedents of
contextual ambidexterity. In fact, there should be studies
on top managers’ characteristics enabling them to develop
contextual ambidexterity inside their firms.
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