This study empirically examines the role of market dynamism and a firm's relational capability in the development of dynamic capability. A moderated hierarchical regression method has been used on the survey data of 218 Indian firms to test the objectives of the study. The findings suggest that relational capability (namely, customer linking capability and strategic partnering capability) is an important driver of dynamic capability. However, the effectiveness of relational capability is dependent on the market dynamism; particularly, when competition intensifies, the impact of customer linking capability declines, whereas the impact of strategic partnering capability on dynamic capability becomes stronger. Furthermore, the finding suggests that even though environmental uncertainty represents an important element of market dynamism, it is a driver, rather than a moderator, of dynamic capability. The study contributes to the extant literature by explicitly specifying the relational capability as a specific competence to develop dynamic capability under different market conditions.
