Abstract:

This research aims to investigate the influence of managing internal and external knowledge on enhancement of the dynamic capabilities in small and medium-sized enterprises (SMEs), in Saudi Arabia. Moreover, it examines the role of information technologies (IT) applications in moderating this influence. Based on a conceptual framework, derived from the literature, a questionnaire was developed and distributed among Saudi SMEs. The results from 126 SMEs confirmed that managing internal and external knowledge positively affects SMEs dynamic capabilities. However Saudi SMEs, to some extents, lack the IT infrastructure and applications to effectively manage knowledge assets. The IT applications were found to be controlling the relationship between internal and external knowledge management and dynamic capability.The study reveals that the lack of IT support in businesses of SMEs which leads to high cost of production, waste, delay and challenges with organizational renewal and adaptation. Hence, the use of IT applications will reduce lead time, reduce operating cost and enhance product differentiation.