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In an innovation-driven economy, small and medium manufacturing enterprises (SMMEs) are attracting attention as a new national growth model contributing to income growth, new job creation, gross sales, and export creation. However, despite that SMMEs play the role of promoting economic growth and development today, SMMEs' management activities are constrained by numerous internal and external environmental factors and face diverse challenges (Minović et al., 2017).
In companies’ business activities, there are direct relationships among business strategies, market uncertainty, technical turbulence, and the intensity of competition. Under market conditions where environmental uncertainty is low, turbulence is relatively low and stability is high, but companies’ tendency to take risks is reinforced. In order to achieve competitive advantages in a destructive competitive environment, companies should carefully analyze the dynamic changes in the market and pursue market-oriented and innovative strategies or strategic innovations (Lukas et al., 2001; Tutar et al., 2015).
In recent years, as information technology has been developed rapidly and consumers' needs have been diversified in the business environment of companies, companies have a task to consider at the strategic level in order to provide more superior value over competitors. Today, customers are willing to pay more for innovative products equipped with new functions, new designs, and new features, especially for technical products. Therefore, it is important for companies to continuously pay attention to market and technology trends in order to successfully commercialize new products (Khin et al., 2012).
Environmental uncertainty refers to the degree to which a company's external environmental factors are very complex so that they cannot be easily predicted and are changing dynamically. Such unpredictable changes require companies’ ability to understand and adapt to changes in the environment (Srinivasan et al., 2011).
In the global economy of today, the pace of environmental changes is becoming faster than ever before due to persistent economic recession and changes in regulations and policies. Therefore, predicting changes in business environments surrounding companies and maintaining stability are becoming more difficult. When the uncertainty of the internal and external environments surrounding companies, including the market, technology, and competitive environments is high, companies become to reach uncertain situations where it is difficult to predict future outcomes, and can face difficulties that impede the survival and development of the companies if they do not respond quickly and flexibly to such environmental changes. Therefore, companies’ strategies should undergo stages of rapid execution, modification, and confirmation in accordance with the changing environments. Companies are exposed to cataclysmic business environments and unpredictability, and it can be said that achieving strategic agility is essential to respond quickly and effectively to such environments (Doz & Kosonen, 2008).
As such, environmental uncertainty has been recognized as a strategic challenge for achieving the survival of companies and sustained competitive advantages in corporate management activities, but previous studies restrictively verified the fragmentary effects of environmental uncertainty on the establishment of effective strategies or business performance thereby involving the limitation that environmental uncertainty does not clearly explain the structural path leading to the achievement of competitive advantages (Silva & Ferreira, 2017).
In addition, although the organizational agility capability has been considered as an important factor that determines companies’ competitive advantages along with strategic directivity in previous studies, empirical studies on the mechanism by which companies’ environmental factors lead to the formation of agility capability and performance are rare, and in particular, studies that conducted empirical analysis from the viewpoint of SMMEs’ organizational capabilities are very scarce (Cegarra-Navarro et al., 2016).