TMT functional background heterogeneity and SMEs’ performance: The role of dynamic capabilities and business environment

Drawing on the insights from the upper echelons theory (UET), we advance the understanding of how top management team (TMT) functional background heterogeneity (TMTFBH) influences the performance of technology-based small- and medium-sized enterprises (SMEs). An analysis based on a sample of listed Chinese SMEs shows that TMTFBH has a positive effect on firm performance, and the two dimensions of dynamic capabilities—integrating and innovating capabilities—mediate this relationship. Furthermore, the business environment positively moderates the relationship between dynamic capabilities and firm performance. This study provides a more nuanced understanding of the mechanisms and conditions underlying the effects of TMTFBH on the performance of technology-based SMEs, highlighting the role of dynamic capabilities and the business environment.