When Demeter meets Coeus: Dynamic Capabilities and Data Literacy in SMEs

Data literacy (DL) is a critical factor effecting a firm’s dynamic capabilities (DC) and innovation capability (IC) as a result. We suggest DL capabilities of a firm is one of the core DC skills and we build our DC model, namely DC Scale, accordingly. In this quantitative empirical research, we explore innovations in 137 firms and test if DC have any impact on those firms’ innovation capabilities. We calculate IC as a function of innovation continuity and innovation performance of the firm. We control for the impact of possible effecting factors such as sector, firm age, firm size and firm performance. We also create innovation type categories and use innovation type as a moderating variable to measure its moderating effect on DC and IC relationship. Our results show no impact of DC on IC without the effect of the moderator. The results point out a dysfunction in firms to utilise DL capabilities but relying on tacit knowledge and visceral judgement, that is intuitive, when innovating. And therefore the innovation categories of product/service innovations and technology adoption are reactive and achieved through the use of substantive capabilities. Only one innovation category, namely organisational and process innovation (OP), moderates the effect of DC on IC. We conclude that this innovation category is linked to the firm’s ability to change the existing substantive capabilities and therefore it is linked to DC.