Building strategic ambidexterity: the importance of networking capability and learning capability in SMES

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Building strategic ambidexterity: the importance of networking capability and learning capability in SMES

Tyna Yunita

Bhayangkara Jakarta Raya Jakarta, Indonesia

Abstract

This research aims to evaluate the literature on strategic ambidexterity (SAY) by investigating how networking capability (NWC) influences learning capability (LNC) to leverage product and market activities. In addition, the effect of NWC and LNC on SAY is analyzed in terms of their interaction. Methodology: Owners/managers of Indonesian SMEs were surveyed to collect data. Based on a quantitative survey of 189 Indonesian SMEs using SMART PLS 3 and a bootstrapping procedure with a sample size of 5000, the validity of the hypotheses is tested. The findings revealed that NWC and LNC have a direct effect on SAY. The results also validate LNC's role as a mediator in the relationship between NWC and SAY. However, the empirical evidence is well established that NWC and LNC substantially contribute to improving Strategic Ambidexterity. There is a shortage of high-quality evidence demonstrating a connection between NWC, LNC, and SAY in the current body of knowledge, especially regarding SMEs. Consequently, this study suggests that SMEs should prioritize network development and adopt flexible strategies. Findings are discussed in terms of theory, methodology, and application.

Keywords: networking capability, learning capability, strategic ambidexterity, SMEs

БУДОВА СТРАТЕГІЧНОЇ КОМПОЗИЦІЇ: ВАЖЛИВІСТЬ МЕРЕЖЕВИХ ЗДАТНОСТЕЙ ТА ЗДАТНОСТІ НАВЧАННЯ В МСП

Bhayangkara Jakarta Raya Jakarta, Indonesia

Метою статті є оцінка літератури про стратегічну двосторонню вправність (SAY) шляхом дослідження того, як мережеві можливості (NWC) впливають на здатність до навчання (LNC), щоб використовувати продукт і ринкову діяльність. Крім того, аналізується вплив NWC і LNC на SAY з точки зору їх взаємодії. Методологія: для збору даних було опитано власників/керівників індонезійських МСП. На основі кількісного опитування 189 індонезійських малих і середніх підприємств з використанням SMART PLS 3 і процедури початкового завантаження з розміром вибірки 5000 перевіряється достовірність гіпотез. Висновки показали, що NWC і LNC мають прямий вплив на SAY. Результати також підтверджують роль LNC як посередника у відносинах між NWC і SAY. Однак емпіричні дані підтверджують, що NWC і LNC значно сприяють покращенню стратегічної амбідекстрії. Існує дефіцит високоякісних доказів, що демонструють зв'язок між NWC, LNC і SAY у поточній сукупності знань, особливо щодо МСП. Отже, це дослідження свідчить про те, що МСП повинні віддати пріоритет розвитку мережі та прийняти гнучкі стратегії. Висновки обговорюються з точки зору теорії, методології та застосування .

Ключовіслова: мережеваздатність,здатність до навчання, стратегічна амбідекстрність, МСП. network learning ability strategic ambiguity

INTRODUCTION

Organizational ambidexterity has been shown to be beneficial to a company's success in several previous studies, which have mainly focused on the correlation between ambidexterity and performance (Gibson & Birkinshaw, 2004). However, Small and medium enterprises (SMEs) ambidexterity is rarely examined (Lubatkin et al., 2006). In addition, this study also answers the call to research SMEs in developing countries (Tsai & Ren, 2019). Supporting the growth of small and medium-sized businesses in Indonesia has been a priority for the Indonesian government as it seeks to foster an entrepreneurial culture. The emergence of entrepreneurship as a policy priority necessitates that the government is vigilant, observant, and precise on the issue of fostering and promoting entrepreneurship (Mirzanti et al., 2015). The emphasis should be placed on supporting small business owners who already know how to run a company and thrive in a competitive market (Tambunan, 2007).

Understanding the behavior and performance of small and medium-sized enterprises (SMEs) requires understanding their networks (Martin Martin et al., 2022). A company is considered to have a network if it can cultivate and distribute it to accomplish a predetermined set of goals (Tidd et al., 2013). Although academics claim that alliances and network relationships have many benefits for small businesses, empirical evidence is lacking regarding the types of network relationships that encourage strategic ambidexterity (Partanen et al., 2020).

Academics have theorized that ambidexterity involves two distinctly different types of learning: (a) exploitation includes things like increasing efficiency, making choices, and implementing strategies, and (b) exploration focus on seeking variation, innovation, and experimentation (Dhir et al., 2018; Simsek, 2009). Despite the significance of learning capability, much debate, misunderstanding, and theoretical disarray persist because the concept is intricate and dynamic (Chiva et al., 2007). Still, how an organization's ability to learn influences its ability to adopt new technologies is unclear(Teo et al., 2006). Academics and professionals have come to view organizational learning or the process by which organizations learn, as crucial for modern businesses.

Using capabilities theory(Eisenhardt & Martin, 2000; Teece et al., 2009), this study investigates the relationship between networking capability and learning capability while accounting for market and product interaction effects in strategic ambidexterity. The following is the outline of this paper: the first part sets the importance of investigating how networking capability affects strategic ambidexterity through the medium of learning capability. A discussion of the study's theoretical underpinnings and hypotheses follows--the next part of the report details the methods used. The last part summarizes the study's key findings, offers suggestions for small and medium-sized enterprises (SMEs), and discusses its limitations.

LITERATURE REVIEW

Strategic Ambidexterity

The strategic ambidexterity perspective provides valuable insights into the performance of Emerging market multinational enterprises (Khan et al., 2022). In addition, Bustinza et al.(2020) investigate whether international manufacturing firms that practice strategic ambidexterity are more successful at developing and commercializing new products and services. By combining exploration and exploitation across or within functional domains, businesses can achieve strategic ambidexterity. In the meantime, in the SME sector, product and market (exploitation and exploration) will exert positive performance-enhancing interaction effects (Voss & Voss, 2013). Through multiple product innovation strategies, businesses can cultivate strategic ambidexterity in product innovation (SAPI) by making the most of both internal and external resources and combining the two (Mei et al., 2021). The previous literature finds that businesses with a vital NWC are better able to build and leverage their networks to improve their strategic performance(Majid et al., 2021).

Networking Capability

A business network consists of various entities working together to achieve a common objective through sharing information, pooling resources, and developing joint projects (Garousi Mokhtarzadeh et al., 2020). When a business has developed the ability to build and leverage its internal and external networks, it is said to have "network capability" (Zacca et al., 2015). The four dimensions of network capability include coordination, relational skill, partner knowledge, and internal communication (Majid et al., 2021). If an organization can create and disseminate its network to achieve its goals, it is said to have a network. An organization's ability to pursue ambidexterity and deal with tension, particularly with external partners, is a function of its network capabilities, which include an evaluation of the organization's internal communication and knowledge of its partners(Partanen et al., 2020). There are two main types of business networks, and they are centralized and decentralized/self-organizing (Provan et al., 2007).

Business organizations can gain access to knowledge from their external networks through their network capabilities(Huggins & Thompson, 2017). Organizations with robust mechanisms for establishing and maintaining external connections will be in the best position to reap this information source's benefits. (Cheng & Sheu, 2018). Academics and professionals have come to view organizational learning or the process by which organizations learn, as crucial for modern businesses. There are five facets to an organization's capacity for learning: (a) experimentation, (b) risk-taking, (3) interaction with the external environment, (4) dialogue, and (5) participatory decision-making (Chiva et al., 2007). Organizations can boost their knowledge, relevant skill sets, and capabilities by investing in their employees' continued education and training (Kazmi et al., 2021).

H1: Network capability has a direct impact on Strategic ambidexterity H2: Network capability has a direct effect on Learning Capability

Learning Capability

Learning capability includes intra-organizational learning, partnerships that spread learning, and open culture and external sources and changes its behavior to reflect the new cognitive situation to improve its performance (Dhir et al., 2018; Lin et al., 2013). A company's ability to "reconfigure" its knowledge is crucial to maintaining a competitive advantage over the long term(Julian & Xu, 2015). A growing body of research indicates that an organization's ability to learn is a significant factor in determining how successfully it adopts and applies innovations that rely heavily on new knowledge (Teo et al., 2006). Organizational learning capability, or the characteristics of an organization and its leadership that foster or facilitate learning, is essential (Chiva et al., 2007). The combination of endeavors yields knowledge that permits the business to exploit and explore, giving it a long-lasting advantage in the market(Dhir et al., 2018). In the context of discovery, ambidexterity can be thought of as a learning activity that yields novel ideas.

Learning capability describes an organization's factors that facilitate its ability to learn (Salas Vallina et al., 2019). The resulting Learning capability creates a sustainable competitive advantage by allowing the company to participate in exploration and exploitation (Gibson & Birkinshaw, 2004). The literature and theory on dynamic capabilities, learning, organization, and ambidexterity, have been critically examined; however, there is a lack of empirical evidence elucidating this link (Souza & Takahashi, 2019). A company's networking prowess can be defined as its capacity to create and exploit strategic alliances with other businesses to gain access to resources under the exclusive management of those other businesses (Karami & Tang, 2019). Lacking adequate networking capability and networking ability to utilize resources in product development projects, the company has made an incorrect determination of the direction of its product development strategy(Mu et al., 2017).

H3: Learning capability has a direct impact on Strategic ambidexterity

H4: Learning capability mediates the relationship between networking capability and strategic ambidexterity

This study examines the causal connection between the variables of networking capability, learning capability, and strategic ambidexterity. Utilizing Structural Equation Modeling (SEM) analysis, the relationship between variables and the effect of one variable on another is examined. This study collected primary data from Micro, Small Medium Enterprises owners through a questionnaire to test the hypothesis. The study included 400 owners/managers of Micro, Small, and Medium Enterprises from 12 districts in Bekasi City, resulting in 189 responses from those who completed the questionnaires. There were 30 questions on the survey, each with a seven-point Likert scale ranging from "strongly disagree" to "strongly agree." We analyzed the data further using SEM PLS software version 3.

Figure 1. The framework for this study's research

Source: Conceptualization of the author

METHODOLOGY

We used three variables to develop the proposed research model: (1) networking capability (NWC), (2) learning capability (LNC), and (3) strategic ambidexterity (SAY). NWC is calculated using seven indicators developed by (Karami & Tang, 2019). While LNC is measured using eleven proposed indicators (Lin et al., 2013). In the meantime, SAY is organized as a second-order construct with two dimensions: exploration and exploitation. The SAY was translated into twelve indices based on previous research (He & Wong, 2004; Voss & Voss, 2013).

Figure 2. Measurement Model Results

Source: SMART PLS data processing results

The research plan served as the basis for the validity and reliability analyses. Tables 2 and 3 present the analysis findings. Outer loading scores (OL) range from 0.624 to 0.827. Each indicator is above 0.60 for OL, which indicates that the indicator is valid. The average variance extracted score (AVE) range from 0.493 to 0.539. A dimension or variable is viable when its AVE score exceeds 0.5. At the same time, Cronbach's Alpha (CA) and Composite Reliability (CR) are above 0.8. Since CA or CR scores are greater than 0.70, Table 2 indicates that all variables within its dimensions are reliable.

Table 1. Analysis of Validity and Reliability

Figure 3. Measurement Model Results (bootstrapping)

Source: SMART PLS data processing results

The 5000 subsamples used in the bootstrapping analysis are presented in Table 3.

Table 3. Hypothesizes Testing

Significance level: *p<0,1; **p < 0.05; ***p < 0.01 Source: SMART PLS data processing results

H1 postulated that NWC and SAY are positively correlated; the results presented in the previous section demonstrate this association. These results align with other studies and show that SMEs' NWC improves Strategic flexibility and performance (Majid et al., 2021). These findings are consistent with other research efforts, proving that NWC helps businesses achieve ambidexterity (Lin et al., 2013). The results of this study also corroborate research findings where NWC mediates the relationship of entrepreneurial orientation to the implementation of SMEs (Karami & Tang, 2019). The increase in NWC is concurrent with the rise in SAY. Network value is a beneficial form of relational capital (Kale et al., 2000). This study reveals that networking capability plays an essential role in the ambidexterity of SMEs because the research location is in the supporting area of the capital, where the kinship system still feels intense.

NWC is significantly predicting LNC according to the results (P = 0,252, p < 0.01). Consistent with the findings of the SME study, NWC could encourage knowledge creation (Zacca et al., 2015). Knowledge creation encompasses not only the technical know-how required, for instance, to install new product features, but also the broader, process-level understanding that is necessary to fulfill customers' requests in a meaningful way (Zacca et al., 2015). On the other hand, NWC is also a network that can strengthen the team and encourage the spirit of learning. An organization can be seen as a network, with departments functioning as nodes interacting with one another and forming formal and informal connections(Brass et al., 2004).

Table 3 shows that the third hypothesis predicted that LNC would benefit SAY (b = 0,177, p < 0,05). The relationship was significant and positive, which supported H3. The estimation results from this study back up this claim, which was previously made by (Tsai & Ren, 2019). Organizations play a crucial role in combining knowledge (sense), ideas (size), and action (reconfiguring) to develop in the learning process, thereby producing ambidexterity (Souza & Takahashi, 2019).

The fourth hypothesis of this study postulates an indirect connection between NWC and SAY via LNC. The direct, indirect, and total effects were identified using SEM with 5000 bootstrapping samples and bias-corrected confidence intervals of 90%. This model's Hypothesis 4 is significantly supported by Table 3 (P =0,045, p < 0.1). Regarding the H4 mediating effects, the findings are as follows: NWC-> SAY (direct effect=0,395, p < 0.05; indirect effect = 0,045, p < 0.05; total effect = 0.440, p < .05). These results indicate that LNC partially mediates the impact of NWC on SAY, providing support for Hypothesis 4. A complex world demands complex solutions, knowledge creation evolves from a collaborative activity where information is exchanged, and the entrepreneur's network capability is key to success (Zacca et al., 2015). This finding supports previous findings that suggest a connection between DC, organizational learning, and ambidexterity (Souza & Takahashi, 2019).

CONCLUSION

This research aims to advance the literature on Strategic Ambidexterity by investigating how Networking Capability influences Learning Capability to leverage product and market activities. The results provide business owners and managers with helpful information regarding networking and learning activities. Owners and managers should spend sufficient time and effort cultivating network capabilities, which includes finding and retaining strategic internal/external partners.

The research adopts the RBV viewpoint by focusing on a company's competencies and abilities, particularly its dynamic capabilities (like its ability to quickly adapt to new market conditions) (Teece et al., 2009). Companies are more likely to share knowledge and transfer organizational learning if they invest in developing their employees (Kazmi et al., 2021).

The study has limitations due to its design, but this only provides more room for future research. Further study is required to generalize this study model beyond the 12 districts and multiple fields from data currently collected (e.g., tourism). The fascinating findings may not apply to commercial enterprises or other sectors, such as NGOs. Second, because only owners or managers completed the survey, single informant bias could be an issue. Future research could consider other antecedents of strategic ambidexterity that interact with networking capability, such as influencers and social media.

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