Dynamic strategic agency, internal capabilities and firm performance

This paper introduces the concept of dynamic strategic agency to explain how firms translate internal capabilities into superior performance in highly competitive markets. Dynamic strategic agency captures the intensity and breadth of firms’ discretionary strategic actions, including changes in product scope and market positioning. Using a large firm-level survey conducted by the Italian National Statistical Institute, we construct synthetic indicators of dynamic strategic agency as well as organizational and personnel capabilities through multivariate techniques. We show that firms with higher levels of dynamic strategic agency experience significantly higher labour productivity growth, especially in business services activities. Moreover, organizational and personnel capabilities emerge as key drivers of dynamic strategic agency, indicating that internal resources affect performance primarily through their role in enabling active and adaptive strategic behaviour (especially in the industry sector). These results highlight the importance of combining strategic action and internal capabilities in a unified framework and carry relevant managerial and policy implications.