Dynamic Capabilities, Government Policies, and Performance in Firms from Emerging Economies: Evidence from India and Pakistan

In this study we developed a model of the dynamic capability development

mechanisms in Emerging Market manufacturing Firms (EMF). We identified three dynamic

capability development mechanisms: organizational learning, reverse engineering, and

manufacturing flexibility. We generated hypotheses based on this framework, linking these

mechanisms with firm performance. We also modelled the roles played by managerial use of

two types of government policies: input supporting policies and marketing supporting policies.

We tested our hypotheses on a sample of Indian and Pakistani manufacturing firms. Results

showed that organizational learning, reverse engineering and manufacturing flexibility had

significant impacts on EMF performance. Additionally, organizational learning combined

with input supporting government policies enhanced performance, and the combination of

manufacturing flexibility and marketing supporting government policies had an insignificant

influence on performance.