The implementation of dynamic capabilities for SMEs in creating innovation Adya Hermawati Widya Gama University, Malang, Indonesia Abstract Purpose – The purpose of this paper is to analyse the adaptation process of small and medium-sized enterprises (SMEs) to volatile environment supported with learning, knowledge and innovation. Design/methodology/approach – This study used an inductive approach to analyse qualitative data obtained from an SME operating in the international market. Various data collection methods, including interview, focus group discussion and observation, were used to allow the researchers to undertake triangulation. Findings – This study demonstrates that managers should be eager to adjust their innovation to a changing environment and continually update pre-determined plans. Learning is an ongoing process required for innovation, requiring up-to-date support from knowledge produced via learning. For this reason, learning is required in all dynamic capability processes. Originality/value – This study offers insight to relatively empirical evidence on how firms respond and adjust to volatile environments using an integrative perspective covering learning, knowledge and innovation. In addition, this offers insight regarding how knowledge can be developed based on learning from the environment and converted into innovation through dynamic capabilities. Keywords Dynamic capability, Resource orchestration, Innovation capability, Innovation, Knowledge management Paper type Research paper 1. Introduction How do small and medium-sized enterprises (SMEs) exploit dynamic capabilities and knowledge in a changing environment? This is the addressed in this study. The two concepts – i.e. dynamic capabilities and knowledge – have been often discussed in literature, but there is still a lot of confusion regarding how these concepts interplay one another (Breznik and Hisrich, 2014). Furthermore, how these concepts are implemented in SMEs seems to have never been observed, as majority of scholars focus their investigation on large-sized companies. Meanwhile, strategies implemented in large-sized companies cannot be simply applied in “reduced scales”; SMEs are not a miniature of large-size companies because these firms have several characteristics not found in large-sized counterparts (Cucculelli et al., 2014; Garcia-Morales et al., 2007). In the existing literature, dynamic capabilities are highlighted as one of strategies adopted by companies to respond to environmental changes (Zahra et al., 2006; Day and Schoemaker, 2016; Teece et al., 2016), yet the basic concepts remain vague and equivocal due to inconsistencies (Peteraf et al., 2013), and there is a lack of empirical research explaining how the concepts can be operationalised in practice (Mohamud and Sarpong, 2016). In addition, there is some concern regarding how dynamic capabilities and innovation capabilities are interrelated, even though existing literature agrees that these are different and distinct concepts (Breznik and Hisrich, 2014). Dynamic capabilities 199 Received 14 June 2019 Revised 30 August 2019 4 November 2019 21 December 2019 Accepted 15 January 2020 Journal of Workplace Learning Vol. 32 No. 3, 2020 pp. 199-216 © Emerald Publishing Limited 1366-5626 DOI 10.1108/JWL-06-2019-0077 The current issue and full text archive of this journal is available on Emerald Insight at: https://www.emerald.com/insight/1366-5626.htm