Converting Organizational Agility into Performance: Sequential Capability Building and the Boundary Role of Environmental Turbulence

Abstract

Creative small and medium-sized enterprises (SMEs) must continuously enhance their adaptive capabilities amid rapid technological change, volatile markets, and intensifying global competition. Although organizational agility (OA) is widely recognized as a higher-order dynamic capability, conclusive empirical evidence on how it translates into firm performance remains limited, as prior studies largely focus on the direct agility-performance relationship without explaining the underlying capability-building process. The study aims to examine how OA enhances creative SME performance through the sequential mediation of talent management (TM) and digital marketing capability (DMC), with environmental turbulence (ET) as a boundary condition. Data were collected through quantitative survey conducted among 329 creative SMEs in Jakarta, Bogor, and Bekasi, Indonesia, with prior export or import experience, and data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM). The results of this study show that OA significantly influences Talent Management (TM), which subsequently enhances Digital Marketing Capability (DMC) and SMEs performance. Sequential mediation analysis confirms that OA generates value primarily through the development of complementary organizational capabilities rather than through a direct effect. ET strengthens the positive effect of OA on performance. This study extends Dynamic Capabilities Theory by positioning TM as a strategic human-capital micro foundation and DMC as a functional capability that translates agility into superior firm performance.