The main purpose of this article is to examine how the internal and external dimensions of organizational flexibility impact hospital performance. Results reveal that matching internal and external flexibilities contributes to the development of capabilities to adopt new strategic options. Such interactions have a significant impact in terms of hospital performance. A cluster of dynamic hospitals, which is characterised by high levels of both internal and external flexibilities, (instead of that have high levels of both internal and external flexibilities) was found to have the double level of performance compared with other clusters. The implications for research and managerial practice are discussed.

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