Developing sustainability performance through dynamic capabilities in a supply chain cluster context

The complexity and uncertainty in the dynamic business environment expose organisations to risks
that may be caused by external or internal factors such as technical failure, human error, strikes,
equipment failure, pandemic diseases, natural disasters or terrorist attacks. These events cause
market shocks as they lead to disruptions in the production process and the flow of products; in
addition, they cause supply and demand fluctuations. One of the tools that organisations can use
to enhance their sustainability and performance during disruptions is to build dynamic capabilities
through establishing strong networks and alliances in the form of a cluster. This research proposes
links between the three dimensions of sustainability (environmental, social and economic) and
dynamic capabilities (resilience and absorptive capability) in a supply chain cluster context. It
develops a conceptual framework that presents supply chain cluster design characteristics
(geographical concentration, networked collaboration and supporting services) as tools for
enhancing sustainability through dynamic capabilities by combining a number of theoretical
views, (systems theory, extended resource-based view and dynamic capability theory), to help
organisations maintain performance during disruptions. Focusing on sustainability and building
environmental-friendly clusters are among the aspects of sustainability development strategy of
the Egyptian government 2030. Through the developed conceptual framework, this research will
investigate the impact of supply chain cluster design characteristics on sustainability through
achieving dynamic capabilities, in addition to investigating the impact of sustainability on
organisational performance.

In order to achieve the main aim of the research, data were collected using 811 questionnaire
responses from organisations operating in the Egyptian market. Structural equation modelling was
used to investigate the relationships between the research variables. Results indicated that there is
a direct link between supply chain cluster design characteristics, namely geographical
concentration, networked collaboration and supporting services and dynamic capabilities
(resilience and absorptive capacity). In addition, dynamic capabilities can significantly enhance
the three dimensions of sustainability (environmental, economic and social). Furthermore,
dynamic capabilities were found to be significantly mediating the relationship between design
characteristics and sustainability. Finally, sustainability can be used to enhance operational and
financial performance except for environmental sustainability, which had no significant impact on
organisational performance. The structural equation modelling technique adopted to analyse the
quantitative data allows illustration of how dynamic capabilities (resilience and absorptive
capacity) affect sustainability (environmental, social, economic) and ultimately impact
organisational, operational and financial performance, while simultaneously taking into
consideration the effect of the three supply chain cluster design characteristics (geographical
concentration, networked collaboration and supporting services) and organisation size, role and
type. The use of standardised data and control variables in this study helps extend systems theory,
dynamic capabilities theory and resources-based view by promoting supply chain clusters as a
system in which sub-elements (cluster members) can form links and depend on each other to create
a pool of resources. In addition, this extension strengthens the generalisability of the abstract ideas
in the theories conceptualised in the framework, as previous research has focused only on high
technology sectors in developed countries. This study fills an additional research gap by testing
the relationships proposed in the conceptual framework in a developing county (Egypt), while
controlling for different business sectors. It also fills the research gap regarding the relationships
between dynamic capabilities and sustainability, and between sustainability and financial and non
financial organisational performance. In addition, it provides a more holistic picture by focusing
on three dimensions of sustainability. The empirical results will also fill a gap in the literature
regarding the impact of clustering on dynamic capabilities. The results from previous research on
clusters and dynamic capabilities lack generalisability because they have tended to be based on
case studies. Furthermore, there is a lack of evidence on how supply chain cluster design
characteristics may be linked to performance through dynamic capabilities and sustainability. The
focus on the link between dynamic capabilities, the three dimensions of sustainability and
organisational performance will allow organisations to use supply chain cluster design
characteristics as tools to enhance sustainability and maintain an acceptable level of performance.
In addition, it will help organisations operating in Egypt to sustain their performance and compete
globally in spite of strong market fluctuations