The Influence of Proactive Capabilities and Knowledge-Based Dynamic Capabilities on the Competitive Advantage of Manufacturing Firms

Abstract

Achieving and sustaining competitive advantage is a goal among firms, but it is increasingly challenging in a rapid changing and sophisticated environment. Most of the environmental management undertaken by firms in developing countries are not able to increase the competitive advantage of the product. Hence, this study investigates proactive capabilities that need to be developed in a dynamic environment where it involves green product innovation, environmental proactivity, alliance pro-activeness, and knowledge-based dynamic capabilities that impact on competitive advantage performance. This study involved a survey of 157 manufacturing firms with ISO 14001 certification throughout Malaysia. By implementing structural equation modelling approach, the results provided evidence of positive and significant direct effects of green product innovation and environmental pro-activity on firm’s competitive advantage. The relationship of alliance pro-activeness was fully mediated by the presence of knowledge-based dynamic capabilities as a condition to survive and prosper in a competitive market.