The Impact of Employee Empowerment-Based Dynamic Capabilities on the Sustainable Performance of SMEs in Shanghai, China

Abstract

Small and medium-sized enterprises (SMEs) increasingly depend on employee initiative and operational execution to maintain sustainable performance under conditions of resource scarcity, digital transformation, and market uncertainty. This study examines the direct effect of employee empowerment-based dynamic capabilities (EEBDC) on SME sustainable performance and the moderating role of operational capability. EEBDC is conceptualised as an empowerment-centred organisational capability through which employees’ meaning, competence, autonomy, participation, and perceived impact support organisational adaptation and improvements in work. A quantitative cross-sectional survey was conducted among managers and employees from 50 SMEs in Shanghai, China. Of 400 questionnaires distributed, 384 valid responses were retained. Data were analysed using SPSS and AMOS, including reliability testing, exploratory and confirmatory factor analyses, correlation analyses, and moderation analyses. The measurement results demonstrated satisfactory internal consistency and convergent validity for EEBDC, operational capability, and sustainable performance. EEBDC had a significant positive effect on sustainable performance (B = 0.364, β = 0.361, p < .001). Operational capability also had a positive effect (B = 0.255, β = 0.277, p < .001), while the EEBDC × operational capability interaction was positive and significant (B = 0.224, β = 0.221, p < .001). The interaction explained an additional 4.7% of the variance in sustainable performance. The study extends Dynamic Capability Theory by providing an employee-centred explanation of organisational adaptation and identifies operational capability as an execution-related boundary condition that strengthens the performance value of empowered employees.