Abstract
<jats:p>This chapter develops the IC-Enhanced Dynamic Capabilities Framework for SMEs operating in VUCA environments. The framework integrates intellectual capital theory with dynamic capabilities theory, positioning human capital, structural capital, and relational capital as foundational resources that enable sensing, seizing, and transforming capabilities. These capabilities drive multi-dimensional performance across profitable growth, productivity enhancement, human capital retention and development, and environmental footprint reduction. The framework operates through bidirectional transformation mechanisms where intellectual capital enables capability development whilst being enhanced through capability deployment, creating reinforcing cycles. Implementation follows a four-phase approach: assessment and preparation, capability development, implementation and integration, and continuous adaptation. The theoretical contribution demonstrates how SMEs can leverage knowledge-based assets to build adaptive capabilities for sustained competitive advantage in turbulent environments.</jats:p>