Micro-foundations of resources, capabilities and international firm performance: A look at LMX

Jeffrey Muldoon, Joshua S. Bendickson, Curtis F. Matherne


The purpose of this paper is to develop a conceptual model on leader-member exchange (LMX), a micro-foundation that predicts macro level outcomes, specifically international firm performance. Based upon a comprehensive review of social exchange and LMX, the authors develop a conceptual model related to small business international firm performance. The paper outlines that, greater average LMX facilitates resource exchange and dynamic capabilities. Increased resource exchange and dynamic capabilities subsequently have a positive mediating effect on international firm performance. The model also posits that smaller span of control, more interactive job design, and more productive exchanges will positively moderate the relationship between average LMX and resource exchanges and dynamic capabilities. The paper extends the literature on micro-foundations in the strategic management literature to link LMX and small business performance. The need for small business owners to encourage strong relationships with their subordinates. Although this implication is obvious, the actual process is not. The model enhances the understanding of how the role of LMX promotes the international firm performance for small businesses, not only directly, but also through resource exchange and dynamic capabilities.


Leader-member exchange; small business; resources, capabilities, international firm performance

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