Moderating role of competitive climate and mediating role of employee dynamic capability in digital performance among employees in China's SMEs

Since COVID-19, organisations have increasingly adopted digital technologies to enhance competitiveness, particularly in Chinese small and medium-sized enterprises (SMEs). Employees play a pivotal role in digital transformation by leveraging digital tools to innovate and adapt. However, research on employee digital performance remains limited, especially in dynamic digital markets. This study, grounded in Resource-Based Theory and Dynamic Capability Theory, examines the impact of organisational support variables which are resources with valuable, rare, inimitable, non-substitutable characteristics (digital leadership, digital capability, High- involvement human resource management practices (HI-HRM), and organisational learning) on employee digital performance. The study also used employee dynamic capability as a mediator and competitive climate as a moderator. This study used purposive sampling, data was collected from employees in technology-based SMEs in four regions of China (Shanghai, Guangdong, Guizhou, and Anhui). After screening, 551 valid samples were analysed using structural equation modelling (SEM). The results indicate that employee dynamic capability plays a crucial mediating role between organisation support variables and employee digital performance, and digital leadership, HIHRM practices and digital capability have no direct impact on employee digital performance which indicates that employee dynamic capability plays a pivotal mediating role in translating those organisational efforts into improvements in employee digital performance. Moreover, organizational learning has a direct and indirect effect on employee digital performance, highlighting the critical role of learning mechanisms within SMEs. In addition, the competitive climate moderated the relationship between employee dynamic capability and employee digital performance, which emphasises the need for context-aware approaches in enhancing employee digital performance. However, digital leadership neither directly impacts employee digital performance nor mediates through employee dynamic capability. This may stem from employees’ limited understanding of leadership strategies and the resource constraints of SMEs. The research framework in this study anticipate to expands the application of dynamic capability theory to new contexts and underscores the necessity for organizations to acquire resources with Valuable, Rare, Inimitable, Non- substitutable characteristics to stimulate employee dynamic capabilities and drive digital transformation, particularly in an increasingly turbulent digital market. Furthermore, the findings indicate that within a certain range, as competitive intensity increases, employee dynamic capabilities are enhanced. Consequently, for policymakers and managers, fostering an appropriate competitive climate within organizations is a critical and should not be overlooked. Finally, this study, which was conducted with an in-depth analysis, provides significant information for industrial development especially for the four surveyed regions. In conclusion, this study suggests that SMEs in dynamic digital markets must cultivate employee dynamic capability beyond relying on resources in dynamic market. This study also supports the understanding of how differences in regional digital economic conditions influence the digital transformation of SMEs.

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