How SMEs build resilience in times of crisis: the role of dynamic capabilities

Abstract

This study aims to examine how small and medium-sized enterprises (SMEs) translate strategic alliances and diversification into organizational resilience through the development of dynamic capabilities. Specifically, it investigates the mediating role of sensing, seizing and reconfiguring capabilities in linking strategic responses to resilient organizational outcomes. Survey data were collected from 128 Canadian SMEs operating in crisis-exposed industries and analyzed using partial least squares structural equation modeling (PLS-SEM). The proposed model examines both direct and indirect relationships among strategic alliances, diversification, dynamic capabilities and organizational resilience. Strategic alliances and diversification both contribute significantly to the development of dynamic capabilities, with diversification exerting the stronger effect. Dynamic capabilities are positively associated with organizational resilience and significantly mediate the relationships between strategic responses and resilient outcomes. The cross-sectional design limits causal inference and the ability to examine capability development over time. Future research could adopt longitudinal or mixed-methods approaches to investigate the evolution of dynamic capabilities and resilience across different stages of disruption and in different institutional contexts. The findings highlight the importance of investing in capability development rather than relying solely on strategic initiatives. For managers, resilience depends on strengthening sensing, seizing and reconfiguring capabilities that enable firms to transform strategic opportunities into adaptive responses. For policymakers, the results underscore the value of capability-oriented support programs, collaborative ecosystems and diversification initiatives that strengthen SME resilience over the long term. This study advances a capability-based perspective of SME resilience by identifying dynamic capabilities as the mechanism through which strategic alliances and diversification contribute to resilient outcomes. By integrating strategic management, dynamic capabilities and resilience into a unified framework, the study provides a process-oriented explanation of how SMEs build resilience under conditions of uncertainty.