The Relationship Between Dynamic Capabilities and Industry 4.0 in Sustaining ICT Service Industry SMEs In Malaysia

Abstract

Small and medium-sized enterprises (SMEs) represent the backbone of Malaysia’s economic development; however, their sustained competitiveness is increasingly challenged by the disruptive forces of the Fourth Industrial Revolution (IR4.0). While prior studies have primarily examined IR4.0 adoption in manufacturing contexts, limited attention has been accorded to the service sector, particularly Information and Communication Technology (ICT) SMEs. Anchored in the Dynamic Capability View (DCV), this conceptual study proposes a theoretical framework comprising four internal capability dimensions which are technological capability, digital organizational culture, organizational readiness, and financial capability with organizational sustainability as the dependent variable, mediated by IR4.0 adoption. Theoretically, this study contributes to extending DCV by integrating IR4.0 adoption as a mediating mechanism that translates internal dynamic capabilities into sustainable organizational performance. Empirically, the framework provides a structured foundation for future quantitative investigation using methods such as Structural Equation Modeling (SEM-PLS) to validate the relationships among dynamic capabilities, IR4.0 adoption, and sustainability. From a policy and managerial standpoint, the study offers actionable insights for SME stakeholders, emphasizing the strategic importance of digital capability-building and readiness enhancement under Malaysia’s national initiatives such as Industry4WRD and NIMP 2030. Collectively, this paper advances theoretical understanding and practical approaches for accelerating digital transformation and sustainability among ICT service SMEs in Malaysia.