Bridging ties: a source of firm heterogeneity in competitive capabilities

What explains differences in firms’ abilities to acquire competitive capabilities? In this paper we propose that a firm’s embeddedness in a network of ties is an important source of variation in the acquisition of competitive capabilities. We argue that firms in geographical clusters that maintain networks rich in bridging ties and sustain ties to regional institutions are well‐positioned to access new information, ideas, and opportunities. Hypotheses based on these ideas were tested on a stratified random sample of 227 job shop manufacturers located in the Midwest United States. Data were gathered using a mailed questionnaire. Results from structural equation modeling broadly support the embeddedness hypotheses and suggest a number of insights about the link between firms’ networks and the acquisition of competitive capabilities. Copyright © 1999 John Wiley & Sons, Ltd.     

Market orientation,marketing capabilities,and firm performance

Drawing on traditional resource‐based theory and its recent dynamic capabilities theory extensions, we examine both the possession of a market orientation and the marketing capabilities through which resources are deployed into the marketplace as drivers of firm performance in a cross‐industry sample. Our findings indicate that market orientation and marketing capabilities are complementary assets that contribute to superior firm performance. We also find that market orientation has a direct effect on firms' return on assets (ROA), and that marketing capabilities directly impact both ROA and perceived firm performance. Copyright © 2009 John Wiley & Sons, Ltd.     

Leveraging supplier capabilities: The role of locus of capability deployment

This study adds to the resource‐based view by studying how client firms may gain performance benefits from supplier IT capabilities in market‐based arrangements where the supplier's IT capabilities are readily available to multiple client firms. I argue that the locus of supplier capability deployment, i.e. whether supplier capabilities are deployed at the client (in‐sourcing) or supplier (outsourcing), has implications for client firm performance. The findings show that in‐sourcing leads to complementary effects between supplier IT capabilities and client operational capabilities. In contrast, clients with weaker operational capabilities benefit from outsourcing the respective activity to the supplier, and may even be able to reduce their capability disadvantage through outsourcing. The data on 964 U.S. credit unions contracting with 22 technology solution providers is archival. Copyright © 2012 John Wiley & Sons, Ltd.     

The strategic impetus for social network ties: reconstituting broken ceo friendship ties

Research on organization–environment relations has focused primarily on formal linkages between organizations such as board interlock ties as a strategy for managing resource dependence. This study examines whether top corporate executives may maintain more informal ties to executives of other firms in order to manage uncertainty arising from resource dependence. Our point of departure is prior research on boards of directors that has examined whether so‐called ‘broken board ties’ (i.e., ties that are disrupted due to executive turnover) tend to be reconstituted, and whether resource dependence explains the likelihood of reconstitution. These studies have generally provided little evidence that corporate board ties are used to manage resource dependence. We draw from theory and research on social embeddedness and friendship to suggest that, as a strategy for managing dependence, the maintenance of friendship ties between top executives provides benefits that are comparable to the supposed benefits of board cooptation, while imposing fewer constraints on the organization. Our theory leads to the contention that, despite limited prior evidence that resource dependence determines the formation of formal board ties, corporate leaders may nevertheless reconstitute informal (i.e., friendship) ties to leaders of other firms that have the power to constrain their firms' access to needed resources when those ties have been disrupted (e.g., due to turnover of the CEO's friend). We test our hypotheses with a unique dataset that includes survey data from U.S. corporate leaders collected at two points in time, thus permitting an assessment of whether top executives reconstitute broken social ties to leaders of other firms, and whether various sources of resource dependence predict the likelihood of reconstitution. We discuss implications for strategic perspectives on inter‐organizational relations and the sociological literature on embeddedness. Copyright © 2006 John Wiley & Sons, Ltd.     

Clarifying the conditions and limits of the contributions of ordinary and dynamic capabilities to relative firm performance

Strategy scholars have argued that capabilities can influence firm performance through a variety of means and mechanisms. However, the role of capabilities and their proposed contributions have been narrowly theorized and insufficiently tested. We contribute to resolving these issues by considering the conditions under which ordinary and dynamic capabilities contribute to higher relative firm performance. We do so by examining the positive and negative contributions of capabilities to relative firm performance as well as the effects of environmental dynamism and the degree of capability heterogeneity. We utilize measures of relative firm performance at both the process and firm level within a sample of Chilean firms, which due to a dynamic environment allows for a clearer link between the environment and the use of capabilities. We find that environmental dynamism negatively affects the contribution of ordinary capabilities and positively affects the contribution of dynamic capabilities to relative firm performance. Further, heterogeneity strengthens the contribution of dynamic capabilities to relative firm performance, but is less important for ordinary capabilities. Interestingly, we find support for the direct effects of capabilities to be stronger with a process‐level performance measure, whereas the influences of environmental dynamism and heterogeneity are stronger with a firm‐level measure. Copyright © 2010 John Wiley & Sons, Ltd.     

Customer capabilities,switching costs,and bank performance

Customers develop switching costs when they invest time and effort to develop capabilities required to optimally use a given product. Such capabilities are likely to be firm specific and cannot be transferred perfectly to competitors' product offerings. Customers who face switching costs are likely to remain with the same firm and consume complementary products that meet their needs. Thus, firms can achieve competitive advantage by exploiting customers' switching costs. In this paper, we hypothesize that the extent to which firms can benefit from customers' switching costs is contingent upon the firms' internal cross‐selling capabilities. We use online banking data to test our hypotheses and find that customers' switching costs contribute to banks' profitability only in the presence of high levels of internal cross‐selling capabilities. Copyright © 2012 John Wiley & Sons, Ltd.     

Where do capabilities come from and how do they matter? A study in the software services industry

Recent years have witnessed a surge of interest in the notion of capabilities as an important source of competitive advantage. This recognition has, in turn, placed emphasis on the question of where and how these capabilities emerge and how they influence firm performance. The present paper is an attempt to address this question. Using a large sample of detailed project‐level data from a leading firm in the global software services industry, we attempt to empirically study the importance of capabilities. We find that two broad classes of capabilities are significant. The first class, which we label client‐specific capabilities, is a function of repeated interactions with clients over time and across different projects. This learning from repeated interactions with a given client reduces project execution costs and helps improve project contribution. The second class, termed project management capabilities, is acquired through deliberate and persistent investments in infrastructure and systems to improve the firm's software development process. Our empirical results suggest that the marginal returns to acquiring different capabilities may be different and an understanding of such trade‐offs can improve firm decisions to improve and/or acquire such capabilities. We discuss the key contributions of our paper and the implications for future research on capabilities. Copyright © 2004 John Wiley & Sons, Ltd.     

Dynamic capabilities,social capital,and rent appropriation: ties that split pies

Who reaps the fruits of a dynamic capability? We argue that while social capital is essential for the acquisition, integration, and release of resources at the core of a dynamic capability, actors can also use social capital for personal gain. Thus, social capital may be a key to understanding both rent generation and rent appropriation. Even when causal ambiguity obscures individual contributions, they may use their social capital to establish credible claims on the rent. Specifically, employees who occupy structural holes, span organizational boundaries, or who are highly central may be most able to appropriate rent because their social capital grants credibility to their claims. Rent that is appropriated in this way may be unobservable in performance measures that fail to distinguish normal compensation from rent. We contribute by identifying the specific role of social capital in a dynamic capability and linking social capital to rent appropriation patterns. Copyright © 2003 John Wiley & Sons, Ltd.     

Product location choice and firm capabilities: evidence from the U.S. automobile industry

We test theories of product differentiation and firm capabilities using data from the U.S. automobile industry. We find managers introduce new models close to their existing ones but far from rival models. We also find entrants and foreign manufacturers locate models closer to rival models. These results are consistent with both economic models of product differentiation and theories of firm capabilities Copyright © 2000 John Wiley & Sons, Ltd.     

Managerial ties,firm resources,and performance of cluster firms

Previous research has documented the relationship among managerial ties, firm resources, and performance in emerging economies such as China. While managerial ties may be embedded in a particular location, some of these ties may be non-location-bound. Therefore, for firms located within one geographically concentrated cluster, how do managerial ties and firm resources affect performance? Using data from 163 firms in two Chinese clusters, we demonstrate that managerial ties and firm resources—independently and in combination—help firms improve market performance. Results support the view that both network-centered strategies (utilizing managerial ties) and market-centered strategies (leveraging firm resources) are critical determinants of firm performance.     

Mapping technological capabilities into product markets and competitive advantage: the case of cholesterol drugs

While a lot of attention has been paid to those characteristics of capabilities that give firms a competitive advantage, a lot less attention has been given to supporting empirical evidence and to the deployment of these capabilities. This paper presents a model for mapping firm capabilities into customer value and competitive advantage in different markets. With empirical evidence from cholesterol drugs, I illustrate how the model can be used to estimate customer value and competitive advantage from technological capabilities. Copyright © 2002 John Wiley & Sons, Ltd.     

A framework linking intangible resources and capabiliites to sustainable competitive advantage

This article is concerned with the role of intangible resources in business strategy. In particular it is concerned with identifying the intangible sources of sustainable competitive advantage. Sustainable competitive advantage results from the possession of relevant capability differentials. Regulatory and positional capabilities are concerned with intangible assets; functional and cultural capabilities are concerned with competencies. A framework linking intangible resources to capabilities has been devised and is used as the basis of a new technique for identifying the relative contribution which the different intangible resources make to competitive advantage. The results of the use of this technique in six case studies are reported.     

Comparing the resource‐based and market‐based views of the firm: empirical evidence from Czech privatization

The recent privatization of state‐owned enterprises in the Czech Republic forms a natural experiment to test and compare the predictive ability of the resource‐based view (RBV) against the market‐based view (MBV) under conditions of great change. It has been recognized in the literature that, under normal stable circumstances, a firm's internal resources and its external market power are fundamentally intertwined. Consequently, it is difficult to identify the relative roles of these two theories in explaining expected firm performance and firm value. However, when market conditions are in a state of flux, as in the case of the Czech Republic in 1992, we expect the firm's resources to be the primary determinants of firm value. In order to test this notion, an RBV model was developed, based on a set of firm features reflecting the rare and valuable ability to compete in the emerging capitalistic economy (as opposed to the currently prevailing bureaucratically planned economy). A contrasting MBV model was also developed, highlighting the role of market power in this regard. These models were assessed in a cross‐sectional sample of 988 Czech firms undergoing privatization. The empirical findings show that the RBV‐driven variables are remarkably better at explaining share values of Czech firms in the period of privatization than MBV‐driven variables. These results underscore the role of firm resources as a primary determinant of firm value in rapidly changing environments. Copyright © 2003 John Wiley & Sons, Ltd.     

Firm capabilities and technology ladders: sequential foreign direct investments of Japanese electronics firms in East Asia

This paper investigates how investments in capabilities offer platforms for the upgrading or downgrading of overseas subsidiaries' activities along a ‘technology ladder’ in response to macroeconomic changes. By analyzing panel data on Japanese electronic firms in East Asia from 1988 to 1994, the empirical results confirm the importance of capabilities at host country, parent company, and local subsidiary levels in sequential foreign investment decisions. The results show that subsidiary capabilities offset macroeconomic factors influencing location decisions of multinational corporations. Copyright © 2002 John Wiley & Sons, Ltd.     

Complementarity,capabilities, and the boundaries of the firm: the impact of within‐firm and interfirm expertise on concurrent sourcing of complementary components

Theories of the firm raise conflicting arguments about how complementarities between two or more components affect firms' knowledge and production boundaries. Traditional arguments in the boundaries of the firm literature suggest that firms will tend to produce sets of complementary components internally, while more recent modularity studies argue that firms can outsource to gain flexibility. We resolve these views by examining concurrent sourcing, which arises when firms both make and buy the same components. We argue that concurrent sourcing of complementary components becomes more common in two cases: when firms have relevant knowledge about the components in conjunction with suppliers (interfirm expertise) and, perhaps more surprisingly, within the firm (within‐firm shared expertise). The results suggest that firms often need to make in order to know, but can partially outsource if they possess sufficient expertise. Copyright © 2009 John Wiley & Sons, Ltd.     

Dynamic capabilities and the emergence of intraindustry differential firm performance: insights from a simulation study

This paper explores how the dynamic capabilities of firms may be linked to differential firm performance within an industry. A formal model is presented in which dynamic capabilities are treated as a set of routines guiding the evolution of a firm's resource configuration. The model centers on the endogenous choice firms make between resource deployment through imitation and experimentation in order to generate alternative resource configurations. Three performance‐relevant attributes of dynamic capabilities are proposed: timing, cost, and learning of resource deployment. Theoretical propositions are developed that suggest how these attributes contribute to the emergence of differential intraindustry firm performance. Simulation analysis offers insights into the trajectories of evolutionary change engendered by dynamic capability, and serves to refine the theoretical propositions. It is found that timing, cost, and learning effects foster the emergence of robust performance differences among firms with strikingly similar dynamic capabilities. Moreover, the results show that even small initial differences among firms can generate significant intraindustry differential firm performance, especially when the effects of timing, cost and learning are combined. Copyright © 2002 John Wiley & Sons, Ltd.     

Centralization of intragroup equity ties and performance of business group affiliates

Research summary : Although prior research has suggested that equity ties are important for business groups, less attention has been paid to the specific mechanisms through which equity ties create value. We develop a framework that specifies how centralization of intragroup equity ties affects the performance of group affiliates. We use the exogenous shock of the 2008 financial crisis and a difference‐in‐differences analysis of 51,730 observations of business group affiliates in Taiwan to show that centralization of equity ties enhances affiliate performance, but such effects weaken when the environment becomes turbulent. Moreover, we find that listed affiliates obtain fewer benefits from centralization than unlisted affiliates. Overall, our study deepens scholarly understanding of not only how groups create value, but also how value is differentially appropriated among affiliates. Managerial summary : Our research speaks directly to owner‐managers of business groups with respect to creating an optimal equity network structure that binds the affiliated firms of the group. Our findings suggest to managers that the overall structure of equity ties in a business group has major implications for the performance of the affiliate firms of the group, and the network structure within the group should be designed deliberately and thoughtfully on an on‐going basis. In particular, control through centralized equity ties is performance‐enhancing in normal periods, but such control may be counterproductive as turbulence increases in business environments, or as the number of listed group firms increases. Hence, owner‐managers may consider optimizing the network structure by lowering the degree of centralized equity ties under such circumstances, or at a minimum, lowering centralized control. Copyright © 2016 John Wiley & Sons, Ltd.     

Resources and capabilities driving competitive advantage in export markets: guidelines for industrial exporters

In the context of the quest for the factors that determine competitive advantage, this study adopts a resource-based view and applies it to industrial goods' manufacturers engaged in exporting activities. The notion of organizational process is used as a filtering mechanism for the development of a classificatory scheme for firms' sources of competitive advantage in export markets. Different combinations of export-related resources and capabilities are identified as drivers of cost, service, and product advantage. Nonetheless, the capability to build enduring relationships with customers emerges as essential in achieving all three types of export competitive advantage. The findings of this inquiry have important implications for business practitioners in export manufacturing firms of industrial products. Limitations of the study are considered, and future research directions are identified.